IDEAS home Printed from https://ideas.repec.org/a/aea/aerins/v1y2019i2p193-208.html
   My bibliography  Save this article

The Dollar, Bank Leverage, and Deviations from Covered Interest Parity

Author

Listed:
  • Stefan Avdjiev
  • Wenxin Du
  • Cathérine Koch
  • Hyun Song Shin

Abstract

We document a triangular relationship in that a stronger dollar goes hand in hand with larger deviations from covered interest parity (CIP) and contractions of cross-border bank lending in dollars. We argue that underpinning the triangle is the role of the dollar as a key barometer of risk-taking capacity in global capital markets.

Suggested Citation

  • Stefan Avdjiev & Wenxin Du & Cathérine Koch & Hyun Song Shin, 2019. "The Dollar, Bank Leverage, and Deviations from Covered Interest Parity," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 193-208, September.
  • Handle: RePEc:aea:aerins:v:1:y:2019:i:2:p:193-208
    Note: DOI: 10.1257/aeri.20180322
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aeri.20180322
    Download Restriction: no

    File URL: https://www.aeaweb.org/doi/10.1257/aeri.20180322.data
    Download Restriction: no

    File URL: https://www.aeaweb.org/doi/10.1257/aeri.20180322.appx
    Download Restriction: no

    File URL: https://www.aeaweb.org/doi/10.1257/aeri.20180322.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tomoyuki Iida & Takeshi Kimura & Nao Sudo, 2016. "Regulatory Reforms and the Dollar Funding of Global Banks: Evidence from the Impact of Monetary Policy Divergence," Bank of Japan Working Paper Series 16-E-14, Bank of Japan.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aerins:v:1:y:2019:i:2:p:193-208. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.