Export Pricing and the Cross-Country Correlation of Stock Prices

Tervala, Juha

doi:10.2139/ssrn.1513238

Abstract

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Export Pricing and the Cross-Country Correlation of Stock Prices

Juha Tervala

University of Helsinki - Department of Political and Economic Studies

November 25, 2009

Bank of Finland Research Discussion Paper No. 28/2009

Abstract:
This study analyses cross-country correlations of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. We show that cross-country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but not notably for temporary technology shocks. In the case of a money supply shock, the producer (local) currency pricing version of the model generates a negative (positive) cross-country correlation of stock prices.

Number of Pages in PDF File: 34

Keywords: stock prices, international business cycles, open economy

JEL Classification: E32, F30, F41, G10

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Date posted: November 28, 2009

Suggested Citation

Tervala, Juha, Export Pricing and the Cross-Country Correlation of Stock Prices (November 25, 2009). Bank of Finland Research Discussion Paper No. 28/2009. Available at SSRN: http://ssrn.com/abstract=1513238 or http://dx.doi.org/10.2139/ssrn.1513238

Contact Information

Juha Tervala (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland