Exchange Rates and External Adjustment: Does Financial Globalization Matter?

26 Pages Posted: 12 Aug 2006

See all articles by Philip R. Lane

Philip R. Lane

Trinity College (Dublin) - Department of Economics; Centre for Economic Policy Research (CEPR); Central Bank of Ireland

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: April 2006

Abstract

This paper addresses the implications of financial globalization for exchange rate behavior. We highlight two dimensions: first, a wider dispersion in net foreign asset positions implies stronger long-term trends in real exchange rates; second, the impact of currency movements on net external wealth is an increasing function of the scale of international balance sheets.

Suggested Citation

Lane, Philip R. and Milesi-Ferretti, Gian Maria, Exchange Rates and External Adjustment: Does Financial Globalization Matter? (April 2006). IIIS Discussion Paper No. 129. Available at SSRN: https://ssrn.com/abstract=923770 or http://dx.doi.org/10.2139/ssrn.923770

Philip R. Lane (Contact Author)

Trinity College (Dublin) - Department of Economics ( email )

Trinity College
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Centre for Economic Policy Research (CEPR)

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Central Bank of Ireland ( email )

P.O. Box 559
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Gian Maria Milesi-Ferretti

International Monetary Fund (IMF) ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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