Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 195: Openness and the exchange rate exposure of national stock markets - a note

Richard Friberg () and Stefan Nydahl
Additional contact information
Richard Friberg: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Stefan Nydahl: Uppsala University, Postal: Uppsala University, PO Box 513, S-751 20 Uppsala, Sweden

Abstract: 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 stock market and the exchange rate. The pattern that we find is consistent with the well documented findings of less than full pass-through of exchange rates onto import prices.

Keywords: exchange rate pass-through; exchange rate exposure

JEL-codes: F30; G10

21 pages, September 17, 1997

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