Export pricing and the cross-country correlation of stock prices

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.