International Capital Flows and Speculation

Rob Hayward; Andros Gregoriou

doi:10.3390/jrfm14050197

International Capital Flows and Speculation

Rob Hayward, Andros Gregoriou

Law, Society and Justice Research Excellence Group

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

Abstract

In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause changes in competitiveness. We report that speculation replaces the effect of equity, bond and most of the interest rate effect. The results show that international speculative sentiment is an important contributor to exchange rate and that monetary and regulatory authorities should find ways of measuring and understanding banking and financial flows.

Original language	English
Article number	197
Journal	Journal of Risk and Financial Management
Volume	14
Issue number	5
DOIs	https://doi.org/10.3390/jrfm14050197
Publication status	Published - 29 Apr 2021

Bibliographical note

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Keywords

exchange rates
currency crisis
capital flow
VAR

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10.3390/jrfm14050197Licence: CC BY

jrfm-14-00197Final published version, 518 KBLicence: CC BY

Cite this

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title = "International Capital Flows and Speculation",

abstract = "In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause changes in competitiveness. We report that speculation replaces the effect of equity, bond and most of the interest rate effect. The results show that international speculative sentiment is an important contributor to exchange rate and that monetary and regulatory authorities should find ways of measuring and understanding banking and financial flows.",

keywords = "exchange rates, currency crisis, capital flow, VAR",

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AU - Gregoriou, Andros

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PY - 2021/4/29

Y1 - 2021/4/29

N2 - In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause changes in competitiveness. We report that speculation replaces the effect of equity, bond and most of the interest rate effect. The results show that international speculative sentiment is an important contributor to exchange rate and that monetary and regulatory authorities should find ways of measuring and understanding banking and financial flows.

AB - In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause changes in competitiveness. We report that speculation replaces the effect of equity, bond and most of the interest rate effect. The results show that international speculative sentiment is an important contributor to exchange rate and that monetary and regulatory authorities should find ways of measuring and understanding banking and financial flows.

KW - exchange rates

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KW - capital flow

KW - VAR

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International Capital Flows and Speculation

Abstract

Bibliographical note

Keywords

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