This paper examines the relationship between the valuation of the stock market and an effective exchange rate. We use monthly data on 10 industrialized countries for the period 1973-1996. We find that the more open the economy, the stronger is the (positive) relationship between return on the...

The relationship between the valuation of the stock market and an effective exchange rate is examined. Monthly data on 11 industrialized countries, for the period 1973-96, are used. It is found that the more open the economy, the stronger is the (positive) relationship between return on the...