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What explains global exchange rate movements during the financial crisis?

  • Fratzscher, Marcel

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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File URL: http://www.sciencedirect.com/science/article/B6V9S-4X4RWJG-2/2/725467c56312b7d17a0caf781fa17d2a
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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