International financial market integration, asset compositions, and the falling exchange rate pass-through
This paper provides an explanation for the observed decline of the exchange rate pass-through into import prices by modeling the effects of financial market integration on the optimal choice of the pricing currency in the context of rigid nominal goods prices. Contrary to previous literature, we take the interdependence of this choice with the optimal portfolio choice of internationally traded financial assets explicitly into account. In particular, price setters move towards more localcurrency pricing and portfolios include more foreign debt assets following increased financial integration. Both predictions are in line with novel empirical evidence.
Year of publication: |
2015
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Authors: | Buzaushina, Almira ; Enders, Zeno ; Hoffmann, Mathias |
Publisher: |
Frankfurt a. M. : Deutsche Bundesbank |
Subject: | exchange rate pass-through | financial integration | portfolio home bias | international price setting |
Saved in:
freely available
Series: | Bundesbank Discussion Paper ; 17/2015 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
ISBN: | 978-3-95729-160-8 |
Other identifiers: | 830122273 [GVK] hdl:10419/112224 [Handle] RePEc:zbw:bubdps:172015 [RePEc] |
Classification: | F41 - Open Economy Macroeconomics ; F36 - Financial Aspects of Economic Integration ; F31 - Foreign Exchange |
Source: |
Persistent link: https://www.econbiz.de/10011292214