News Shocks, Exchange Rates and Equity Prices
IMF Working Papers(2008)
摘要
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 becomes more volatile without afiecting the volatility of the underlying processes|a positive correlation between news and cur- rent 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 re- turn 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 ∞oating currencies.
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关键词
equity prices,news shocks,asset price volatility.,monetary policy,persistence,exchange rates,productivity,working paper,economic models,general equilibrium
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