The Geography of Exchange Rate Disconnect

48 Pages Posted: 18 Feb 2021

See all articles by Gurdip Bakshi

Gurdip Bakshi

Temple University - Fox School of Business and Management; Fox School of Business

John Crosby

University of Maryland - Robert H. Smith School of Business

Xiaohui Gao Bakshi

Fox School of Business, Temple University

Date Written: August 1, 2020

Abstract

This paper proposes a measure of exchange rate disconnect. Working in a two-currency international economy, our theory implies that the disconnect is the ratio of two martingales. We
analyze empirically our measure of disconnect using 406 pairs of economies to reveal a geography of disconnect. Linking theory to returns of international bonds and equities, we examine cross-sectional disparities in disconnect with respect to multidimensional attributes of the global economy.

Keywords: Exchange rate disconnect, geography, international bond, equity, and currency markets

JEL Classification: G12, G15, E44, F31, F36

Suggested Citation

Bakshi, Gurdip S. and Crosby, John and Gao, Xiaohui, The Geography of Exchange Rate Disconnect (August 1, 2020). Available at SSRN: https://ssrn.com/abstract=3763550 or http://dx.doi.org/10.2139/ssrn.3763550

Gurdip S. Bakshi

Temple University - Fox School of Business and Management ( email )

Philadelphia, PA 19122
United States

HOME PAGE: http://https://sites.google.com/view/gurdipbakshi1

Fox School of Business ( email )

Department of Finance
Philadelphia, PA 19022
United States
215-204-6117 (Phone)
tuk40718@temple.edu (Fax)

HOME PAGE: http://https://sites.google.com/view/gurdipbakshi1

John Crosby

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
+447979901892 (Phone)

HOME PAGE: http://www.john-crosby.co.uk/

Xiaohui Gao (Contact Author)

Fox School of Business, Temple University ( email )

Philadelphia, PA 19122
United States

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