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Export pricing and the cross‐country correlation of stock prices

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  • Juha Tervala

Abstract

This study analyses the cross‐country correlation of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. It is shown 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 negative (positive) cross‐country correlation of stock prices.

Suggested Citation

  • Juha Tervala, 2011. "Export pricing and the cross‐country correlation of stock prices," Review of Financial Economics, John Wiley & Sons, vol. 20(2), pages 74-83, May.
    • Handle: RePEc:wly:revfec:v:20:y:2011:i:2:p:74-83
    DOI: 10.1016/j.rfe.2011.03.002
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