Are Different-Currency Assets Imperfect Substitutes ?

@inproceedings{Evans2003AreDA,
  title={Are Different-Currency Assets Imperfect Substitutes ?},
  author={Martin D. D. Evans and Richard G. Lyons},
  year={2003}
}
This paper provides a new test for whether different-currency assets are imperfect substitutes. Past work on imperfect substitutability in foreign exchange falls into two groups: (1) tests using measures of asset supply and (2) tests using measures of central-bank asset demand. We address the demand side, but we use a broad measure of public demand rather than focusing on demand by central banks. Under floating rates, changing public demand has no direct effect on monetary fundamentals, current… CONTINUE READING

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