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New Shocks, Exchange Rates and Equityprices
By:Pietro Cova,Mr. Alessandro Rebucci,Akito Matsumoto,Massimiliano Pisani
Published on 2008-12-01 by International Monetary Fund
We study exchange rate and equity price dynamics, in general equilibrium, in the presence of news shocks about future productivity and monetary policy. We identify a condition under which these asset prices become more volatile without affecting the volatility of the underlying processes-a positive correlation between news and current shocks. This condition also explains why persistent underlying processes generate volatile asset prices. In addition, we show that the correlation between exchange rate and equity returns depends critically on the currency denomination of the equity return and the monetary policy reaction to productivity shocks. The model we set up does well at matching second moments of exchange rate and equity returns for major floating currencies.
This Book was ranked at 6 by Google Books for keyword Nominal rigidity.
Book ID of New Shocks, Exchange Rates and Equityprices's Books is yVS8hTxAIvYC, Book which was written byPietro Cova,Mr. Alessandro Rebucci,Akito Matsumoto,Massimiliano Pisanihave ETAG "OfkqL4YrJJU"
Book which was published by International Monetary Fund since 2008-12-01 have ISBNs, ISBN 13 Code is 9781452710730 and ISBN 10 Code is 1452710732
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