Are international fund flows related to exchange rate dynamics?
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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.
Li , S , de Haan , J & Scholtens , B 2018 , ' Are international fund flows related to exchange rate dynamics? ' Open Economies Review , vol 29 , no. 1 , pp. 31-48 . DOI: 10.1007/s11079-017-9469-5
Open Economies Review
© 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.
This research is supported by the National Natural Science Foundation of China (NSFC Grant Numbers: 71273257, 71532013, 71703182).
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