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What explains global exchange rate movements during the financial crisis?

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  • Fratzscher, Marcel

Abstract

A striking and unexpected feature of the financial crisis has been the sharp appreciation of the US dollar against virtually all currencies globally. The paper finds that negative US-specific macroeconomic shocks during the crisis have triggered a significant strengthening of the US dollar, rather than a weakening. Macroeconomic fundamentals and financial exposure of individual countries are found to have played a key role in the transmission process of US shocks: in particular countries with low FX reserves, weak current account positions and high direct financial exposure vis-à-vis the United States have experienced substantially larger currency depreciations during the crisis overall, and to US shocks in particular.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 28 (2009)
Issue (Month): 8 (December)
Pages: 1390-1407

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Handle: RePEc:eee:jimfin:v:28:y:2009:i:8:p:1390-1407

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Financial crisis Exchange rates Global imbalances Shocks United States US dollar Transmission channels;

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References

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Citations

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Cited by:
  1. Naifar, Nader, 2011. "What explains default risk premium during the financial crisis? Evidence from Japan," Journal of Economics and Business, Elsevier, vol. 63(5), pages 412-430, September.
  2. Chudik, Alexander & Fratzscher, Marcel, 2011. "Identifying the global transmission of the 2007-2009 financial crisis in a GVAR model," European Economic Review, Elsevier, vol. 55(3), pages 325-339, April.
  3. Andrew K. Rose & Mark M. Spiegel, 2009. "Cross-country causes and consequences of the 2008 crisis: early warning," Working Paper Series 2009-17, Federal Reserve Bank of San Francisco.
  4. Daniel Stavarek, 2011. "European exchange rates volatility and its asymmetrical components during the financial crisis," MENDELU Working Papers in Business and Economics 2011-17, Mendel University in Brno, Faculty of Business and Economics.
  5. Rose, Andrew K & Spiegel, Mark, 2011. "Dollar Illiquidity and Central Bank Swap Arrangements During the Global Financial Crisis," CEPR Discussion Papers 8557, C.E.P.R. Discussion Papers.
  6. Bong-Han Kim & Hyeongwoo Kim & Hong-Ghi Min, 2011. "Reassessing the Link between the Japanese Yen and Emerging Asian Currencies," Auburn Economics Working Paper Series auwp2011-05, Department of Economics, Auburn University.
  7. Bong-Han Kim & Hyeongwoo Kim, 2011. "Spillover Effects of the US Financial Crisis on Financial Markets in Emerging Asian Countries," Auburn Economics Working Paper Series auwp2011-04, Department of Economics, Auburn University.
  8. Habib, Maurizio M. & Stracca, Livio, 2012. "Getting beyond carry trade: What makes a safe haven currency?," Journal of International Economics, Elsevier, vol. 87(1), pages 50-64.
  9. Suh, Sangwon, 2011. "Currency hedging failure in international equity investments and an efficient hedging strategy: The perspective of Korean investors," Pacific-Basin Finance Journal, Elsevier, vol. 19(4), pages 390-403, September.
  10. Agata Osinska, Grzegorz Tchorek, 2010. "Financial Crisis and Changes in the International Monetary System. Implications for Euro," Equilibrium, Wydawnictwo Naukowe Uniwersytetu Mikolaja Kopernika, vol. 2, pages 9-19.

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