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The Dollar - Mark axis

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  • Gabriele Galati

Abstract

Over the last two decades, most European currencies have tended to weaken against the mark as the latter strengthened against the dollar. Moreover, the strength of the response of European cross-rates has tended to remain in the same order over time. I first set out the stylised facts of this phenomenon, referred to as the dollar-mark axis, and then try to identify its determinants. In addition to exchange rate policy, I examine the correlation of cyclical fluctuations and trade links (two factors suggested by the theory of optimum currency areas) and the bias of international investors in the currency composition of their portfolios.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 74.

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Length: 27 pages
Date of creation: Aug 1999
Date of revision:
Handle: RePEc:bis:biswps:74

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  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
  2. von Hagen, Jurgen & Neumann, Manfred J M, 1994. "Real Exchange Rates within and between Currency Areas: How Far Away Is EMU?," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 236-44, May.
  3. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
  4. Agnès Bénassy-Quéré, 1997. "Optimal Pegs for Asian Currencies," Working Papers 1997-14, CEPII research center.
  5. Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
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Cited by:
  1. Gabriele Galati & Philip D. Wooldridge, 2006. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," BIS Working Papers 218, Bank for International Settlements.
  2. Robert N McCauley, 2002. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ33, June.

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