Essays on international stock markets and real exchange rate dynamics

Wong, Kai Tim, Douglas (2019) Essays on international stock markets and real exchange rate dynamics. PhD thesis, University of Glasgow.

Abstract

This thesis aims to examine the long-run determinants of the real exchange rate, and to identify the sources of real exchange rate and relative stock price short-run fluctuations. In chapter 1, I incorporate the relative stock prices into the Dornbusch’s Mundell-Fleming Real Exchange Rate Model in order to investigate the long-run relationship between the money, goods and stock markets. In chapter 2, I build on the work of Dornbusch (1976), Clarida and Gali (1994), Malliaropulos (1998) and Hoffmann and MacDonald (2000) in order to form the sticky-price equilibrium solution for identifying the source of real exchange rate fluctuation. In chapter 3, I empirically investigate whether the financial crises, the US monetary policy and the exchange rate regime switching of a country affect the real exchange rate co-moment. In addition to the cross-country real exchange rates correlation, the evolution of the equilibrium real exchange rates equicorrelation and temporary real exchange rates equicorrelation are also examined. In chapter 4, I present a model which builds on the stochastic rational expectations open macro model presented by Obstfeld (1985) and Clarida and Gali (1994) and incorporates Malliaropulos’s (1998) theoretical relationship between the real exchange rate and the relative stock differential. The model provides both the short- and long-run flexible price solution for identifying the source of relative stock prices. In chapter 5, I attempt to investigate whether the exchange rate can predict future changes in the stock market return and in the economic performance of a country. I present a model that can be used for analysing whether the real exchange rate or the real exchange rate misalignment would contain an economically significant predictable component on forecasting the future stock price movement and the real output.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Keywords: Financial crisis, real exchange rate, international financial markets, macroeconomic shocks.
• Subjects: H Social Sciences > H Social Sciences (General); H Social Sciences > HB Economic Theory; H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Economics
• Supervisor's Name: MacDonald, Professor Ronald and Tsoukas, Professor Serafeim
• Date of Award: 2019
• Depositing User: Mr kai tim wong
• Unique ID: glathesis:2019-41051
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 18 Mar 2019 13:33
• Last Modified: 05 Mar 2020 21:07
• Thesis DOI: 10.5525/gla.thesis.41051
• URI: https://theses.gla.ac.uk/id/eprint/41051