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The Dollar in the Turmoil

Author

Listed:
  • 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.

Suggested Citation

  • Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2009. "The Dollar in the Turmoil," Working Papers 2009-08, CEPII research center.
  • Handle: RePEc:cii:cepidt:2009-08
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    References listed on IDEAS

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    1. Philip R. Lane & Gian Maria Milesi-Ferretti, 2002. "Long-Term Capital Movements," NBER Chapters,in: NBER Macroeconomics Annual 2001, Volume 16, pages 73-136 National Bureau of Economic Research, Inc.
    2. Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2008. "Equilibrium Exchange Rates: a Guidebook for the Euro-Dollar Rate," Working Papers 2008-02, CEPII research center.
    3. Philip R. Lane & Jay C. Shambaugh, 2010. "Financial Exchange Rates and International Currency Exposures," American Economic Review, American Economic Association, vol. 100(1), pages 518-540, March.
    4. 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, vol. 39(2), pages 343-369, May.
    5. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External wealth, the trade balance, and the real exchange rate," European Economic Review, Elsevier, vol. 46(6), pages 1049-1071, June.
    6. 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, December.

    More about this item

    Keywords

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

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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