Exchange rates during financial crises
AbstractExchange rate movements during the global financial crisis of 2007-09 were unusual. Unlike in two previous episodes - the Asian crisis of 1997-98 and the crisis following the Russian debt default in 1998 - in 2008 a large number of currencies depreciated sharply even though they were not at the centre of the crisis. Moreover, during 2009, the crisis-related movements reversed strongly for a number of countries. Two factors likely have contributed to these developments. First, during the latest crisis, safe haven effects went against the typical pattern of crisis-related flows. Second, interest rate differentials explain more of the crisis-related exchange rate movements in 2008-09 than in the past. This probably reflects structural changes in the determinants of exchange rate dynamics such as the increased role of carry-trade activity.
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Bibliographic InfoArticle provided by Bank for International Settlements in its journal BIS Quarterly Review.
Volume (Year): (2010)
Issue (Month): (March)
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- G01 - Financial Economics - - General - - - Financial Crises
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