Exchange Rates and External Adjustment: Does Financial Globalization Matter?
26 Pages Posted: 12 Aug 2006
Date Written: April 2006
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.
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