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Currency risk and the safe-haven hypothesis

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  • Khosrow Doroodian
  • Tony Caporale

Abstract

It has been argued that the dollar's role as a safe currency may affect its value over and above what can be justified fundamentally. This view stresses the role of the dollar as a safe-haven currency whose demand increases during periods of uncertainty. Applying a generalized autoregressive conditional heteroskedasticity framework to data on four bilateral exchange rates versus the dollar, the results show that uncertainty strengthens the dollar. Copyright International Atlantic Economic Society 2000

Suggested Citation

  • Khosrow Doroodian & Tony Caporale, 2000. "Currency risk and the safe-haven hypothesis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(2), pages 186-195, June.
    • Handle: RePEc:kap:atlecj:v:28:y:2000:i:2:p:186-195
    DOI: 10.1007/BF02298360
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    References listed on IDEAS

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    1. Diebold, Francis X & Nerlove, Marc, 1989. "The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar..
    2. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1, October.
    3. Robert E. Cumby & Maurice Obstfeld, 1984. "International Interest Rate and Price Level Linkages under Flexible Exchange Rates: A Review of Recent Evidence," NBER Chapters, in: Exchange Rate Theory and Practice, pages 121-152, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Wu, Chih-Chiang & Wu, Chang-Che, 2017. "The asymmetry in carry trade and the U.S. dollar," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 304-313.

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