Are international fund flows related to exchange rate dynamics?

Suxiao Li; Jakob de Haan; Bert Scholtens

doi:10.1007/s11079-017-9469-5

Are international fund flows related to exchange rate dynamics?

Suxiao Li, Jakob de Haan, Bert Scholtens

Centre for Responsible Banking and Finance

Research output: Contribution to journal › Article › peer-review

Abstract

Employing monthly data for 53 countries between 1996 and 2015, we investigate the relationship between international fund flows and exchange rate dynamics. We find strong co-movement between funds flows (as measured with the EPFR Global data base) and bilateral real exchange rates vis-à-vis the USD. This holds both for equity flows and bond flows. However, bond flows have a more significant relationship with RER appreciation than equity flows in developing countries, while in developed countries equity flows play a more important role. Under a more flexible exchange rate regime the real exchange rate appreciation associated with fund flows is higher.

Original language	English
Pages (from-to)	31-48
Number of pages	18
Journal	Open Economies Review
Volume	29
Issue number	1
Early online date	19 Oct 2017
DOIs	https://doi.org/10.1007/s11079-017-9469-5
Publication status	Published - Feb 2018

Keywords

International fund flows
Exchange rate
Exchange rate regime
Dynamic panel data model

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10.1007/s11079-017-9469-5Licence: CC BY

Li_2017_OER_InternationalFundFlows_CC
© The Author(s) 2017. Open Access. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Final published version, 1.17 MBLicence: CC BY

Cite this

@article{3b6fcbb320ae4cdb8bd00cf3ac8673de,

title = "Are international fund flows related to exchange rate dynamics?",

abstract = "Employing monthly data for 53 countries between 1996 and 2015, we investigate the relationship between international fund flows and exchange rate dynamics. We find strong co-movement between funds flows (as measured with the EPFR Global data base) and bilateral real exchange rates vis-{\`a}-vis the USD. This holds both for equity flows and bond flows. However, bond flows have a more significant relationship with RER appreciation than equity flows in developing countries, while in developed countries equity flows play a more important role. Under a more flexible exchange rate regime the real exchange rate appreciation associated with fund flows is higher. ",

keywords = "International fund flows, Exchange rate, Exchange rate regime, Dynamic panel data model",

author = "Suxiao Li and {de Haan}, Jakob and Bert Scholtens",

note = "This research is supported by the National Natural Science Foundation of China (NSFC Grant Numbers: 71273257, 71532013, 71703182).",

year = "2018",

month = feb,

doi = "10.1007/s11079-017-9469-5",

language = "English",

volume = "29",

pages = "31--48",

journal = "Open Economies Review",

issn = "0923-7992",