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The Dollar in the Turmoil

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  • Agnès Bénassy-Quéré
  • Sophie Béreau
  • Valérie Mignon

Abstract

We study the impact of the global financial crisis on the equilibrium exchange rate of the US dollar. We first simulate the impact of the crisis on the US net foreign asset position. Then, we calculate the equilibrium value of the dollar according both to a BEER and to a FEER approach. We find the case for a strong, although temporary, depreciation of the dollar even more acute than before the crisis. This suggests that the strength of the dollar in late 2008 and early 2009 may be short-lived.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2009-08.

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Date of creation: Apr 2009
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Handle: RePEc:cii:cepidt:2009-08

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Keywords: Equilibrium exchange rate; US dollar; Global imbalances; Crisis; Valuation effects;

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  1. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "Long-Term Capital Movements," Trinity Economics Papers, Trinity College Dublin, Department of Economics 200112, Trinity College Dublin, Department of Economics.
  2. Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2008. "Equilibrium Exchange Rates: a Guidebook for the Euro-Dollar Rate," Working Papers, CEPII research center 2008-02, CEPII research center.
  3. Pierre-Olivier Gourinchas & Hélène Rey, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," NBER Working Papers 11563, National Bureau of Economic Research, Inc.
  4. Philip R. Lane & Gian Maria Milesi-Ferretti, 2001. "External Wealth, the Trade Balance, and the Real Exchange Rate," Trinity Economics Papers, Trinity College Dublin, Department of Economics 200121, Trinity College Dublin, Department of Economics.
  5. Philip R. Lane & Jay C. Shambaugh, 2007. "Financial Exchange Rates and International Currency Exposures," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp229, IIIS.
  6. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
  7. Olivier Blanchard & Francesco Giavazzi & Filipa Sa, 2005. "International Investors, the U.S. Current Account, and the Dollar," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 1-66.
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Cited by:
  1. Robert N McCauley & Patrick McGuire, 2009. "Dollar appreciation in 2008: safe haven, carry trades, dollar shortage and overhedging," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.

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