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The three chapters of this thesis address two questions. First, how are real and nominal exchange rates between different national currencies determined? Second, how does this determination influ- ence the international transmission of macroeconomic fluctuations and, especially, monetary policy disturbances? Chapter 1 comprises an empirical evaluation of long-run purchasing power parity as a theory of equilibrium nominal exchange rate determination for the post-Bretton Woods data. Structural time series methods are used to identify bivariate moving average representations of nominal exchange rates and relative goods prices and to test whether these empirical representations are consistent with the implications of purchasing power parity. Long-run purchasing power parity can be un ambiguously rejected for the G- 7 countries. There are permanent deviations from parity which account for almost all of the variance of real exchange rates, and which are driven by permanent disturbances to nominal rates which are never reflected in relative goods prices. Chapter 2 presents an empirical evaluation of the hypothesis that the global Depression of the 1930’s was attributable to international transmission of (idiosyncratic) U.S. monetary policy actions through the International Gold Exchange Standard - fixed exchange rate - regime. Specifically, the analysis evaluates whether the interwar output collapse in Canada was caused by transmitted U.S. monetary policy disturbances. A multivariate structural time series representation of the Cana dian macroeconomy is estimated which is consistent with the dynamic and long-run equilibrium properties of a Mundell- Fleming small open economy model and in which U.S. data represent the ‘rest of the world’. The empirical results show that U.S. monetary disturbances play a negligible role for both Canadian and U.S. output movements in the 1930’s. Permanent common real shocks to outputs can account for the onset, depth and duration of the Depression in both economies. There is little evidence to support a Gold-Standard transmitted global output collapse through the transmission mechanisms usually associated with purchasing power parity theories of real exchange rate determination. Chapter 3 develops an alternative theory of real and nominal exchange rate determination and of the international transmision mechanism which can account for many stylized facts regarding the empirical behaviour of real and nominal exchange rates that long-run purchasing power parity fails to explain. In a two-country, two-currency overlapping generations model, the role of optimal portfolio choices between internationally traded assets is emphasized - rather than goods market trade - as the source of currency demands. These demands, and supplied of assets generated by domestic monetary policies, determine both real and nominal exchange rates. Here, monetary policy changes can induce permanent international and intra-national reallocations through real exchange rate and real interest rate adjustments. This transmission mechanism differs markedly from that implied by purchasing power parity.

This thesis analyzes the nature of foreign equity trades in relation to their effects on local markets. My goal is to contribute to the understanding of equity flows of foreign investors and their effect on the local markets. The thesis consists of two chapters, both of which employ a novel data set that is consisted of monthly equity flows by foreign investors at Istanbul Stock Exchange of Turkey. The first chapter, Foreign Ownership and World Market Integration, aims to explain the de facto financial market integration with global markets with foreign equity ownership using a novel data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global nancial integration and past portfolio in flows by foreign investors on the cross-section of local stocks. The results have high economic significance: Across individual stocks a 1.4% increase in foreign portfolio inflows corresponds to up to 3.3% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The results are indicative of a causal link: The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration. The second chapter is titled as Uninformed Momentum Traders and it studies the relationship between momentum trading and information. I present evidence that supports the hypothesis that momentum trading is linked to a lack of information. I document significant momentum trading by foreign investors in stocks on which they potentially have more informational disadvantages. Small stocks, stocks with high volatility and low liquidity, stocks that are financially less integrated and have greater foreign exchange risk are subject to greater momentum trading. Moreover, stocks on which foreign trades indicate lower future profitability are subject to higher momentum trading. Additionally, I show that momentum trades by foreign investors exert contemporaneous price pressure and have no valuable longer-run information content. The contemporaneous price pressure of 2.30% per month is followed by a significant return reversal in the following two quarters. Finally, there is strong evidence that foreign investors do not possess local market speci c information. Momentum trading by foreign investors is triggered by the past profitability of the momentum factor in the local market. However, the negative pro tability of momentum makes momentum trading a sub-optimal trading strategy.

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<p>In most African countries the private sector provides the main impetus for economic growth, especially since countries started opening up their economics for foreign investment. Foreign investments have played an important role in the economic growth and development process. Consequently, the purpose of this work was to analyse the consequences of having a MAI in light of the proposed OECD Agreement, the implications it may have for developing countries in Africa, and the way forward towards a balanced multilateral Agreement.</p>

This thesis analyzes the nature of foreign equity trades in relation to their effects on local markets. My goal is to contribute to the understanding of equity flows of foreign investors and their effect on the local markets. The thesis consists of two chapters, both of which employ a novel data set that is consisted of monthly equity flows by foreign investors at Istanbul Stock Exchange of Turkey. The first chapter, Foreign Ownership and World Market Integration, aims to explain the de facto financial market integration with global markets with foreign equity ownership using a novel data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global nancial integration and past portfolio in flows by foreign investors on the cross-section of local stocks. The results have high economic significance: Across individual stocks a 1.4% increase in foreign portfolio inflows corresponds to up to 3.3% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The results are indicative of a causal link: The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration. The second chapter is titled as Uninformed Momentum Traders and it studies the relationship between momentum trading and information. I present evidence that supports the hypothesis that momentum trading is linked to a lack of information. I document significant momentum trading by foreign investors in stocks on which they potentially have more informational disadvantages. Small stocks, stocks with high volatility and low liquidity, stocks that are financially less integrated and have greater foreign exchange risk are subject to greater momentum trading. Moreover, stocks on which foreign trades indicate lower future profitability are subject to higher momentum trading. Additionally, I show that momentum trades by foreign investors exert contemporaneous price pressure and have no valuable longer-run information content. The contemporaneous price pressure of 2.30% per month is followed by a significant return reversal in the following two quarters. Finally, there is strong evidence that foreign investors do not possess local market speci c information. Momentum trading by foreign investors is triggered by the past profitability of the momentum factor in the local market. However, the negative pro tability of momentum makes momentum trading a sub-optimal trading strategy.

Thesis (Ph. D.)--University of Washington. / Bibliography: l. [141]-144.

Thesis (Ph. D.)--University of Washington, 1997. / Vita. Includes bibliographical references (leaves [201]-216).

Thesis (Ph. D.)--UCLA, 2008. / Vita. Includes bibliographical references.