2009
28/2009
Export pricing and the cross-country correlation of stock prices
Author(s): Juha Tervala
2009. 31 pages.
Publisher: Bank of Finland
ISBN 978-952-462-544-9 (Printed publication)
ISBN 978-952-462-545-6 (Web publication)
Search words: stock prices, international business cycles, open economy, E3, F3, F4, G1, Juha Tervala
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.