Topic
Exchange rate
About: Exchange rate is a research topic. Over the lifetime, 47255 publications have been published within this topic receiving 944563 citations. The topic is also known as: foreign-exchange rate & forex rate.
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TL;DR: In this article, the authors estimate nonlinear time-series models of the deviations of the dollar-sterling and dollar-mark exchange rates from the level suggested by simple monetary fundamentals over the recent floating rate period.
521 citations
TL;DR: The authors argue that the negative skewness is due to sudden unwinding of carry trades, which tend to occur in periods in which risk appetite and funding liquidity decrease, and controlling for liquidity helps explain the uncovered interest-rate puzzle.
Abstract: This paper documents that carry traders are subject to crash risk: i.e. exchange rate movements between high-interest-rate and low-interest-rate currencies are negatively skewed. We argue that this negative skewness is due to sudden unwinding of carry trades, which tend to occur in periods in which risk appetite and funding liquidity decrease. Funding liquidity measures predict exchange rate movements, and controlling for liquidity helps explain the uncovered interest-rate puzzle. Carry-trade losses reduce future crash risk, but increase the price of crash risk. We also document excess co-movement among currencies with similar interest rate. Our flndings are consistent with a model in which carry traders are subject to funding liquidity constraints.
520 citations
01 Jan 2001
TL;DR: The 1990's has been punctuated by a series of severe financial and currency crises: the Exchange Rate Mechanism (ERM) attacks of 1992; the Mexican peso collapse of 1994; the East Asian crisis of 1997; the Russian collapse of 1998; and the Brazilian devaluation of 1999.
Abstract: The 1990’s has been punctuated by a series of severe financial and currency crises: the Exchange Rate Mechanism (ERM) attacks of 1992; the Mexican peso collapse of 1994; the East Asian crisis of 1997; the Russian collapse of 1998; and the Brazilian devaluation of 1999. One striking characteristic of several of these crises was how an initial country-specific shock was rapidly transmitted to markets of very different sizes and structures around the globe. This has prompted a surge of interest in “contagion”.
516 citations
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01 Jan 1993
TL;DR: The transition to European monetary union (EMU) appeared to be fully underway in 1992 as discussed by the authors and the European monetary system (EMS) celebrated five years of exchange rate stability: sixty full months without a realignment.
Abstract: FROM THE STANDPOINT OF EUROPEAN MONETARY AFFAIRS, 1992 opened with a bang and closed with a whimper. In January, the European monetary system (EMS) celebrated five years of exchange rate stability: sixty full months without a realignment. The month before, the representatives of European Community (EC) member-states initialed the Treaty on Economic and Monetary Union concluded at Maastricht in the Netherlands. The transition to European monetary union (EMU) appeared to be fully underway. By the end of the year, the European monetary system had enduredindeed, was continuing to experience-the most severe crisis in its fourteen-year history. Two of ten currencies, the Italian lira and the British
516 citations
TL;DR: The authors showed that exchange rate models based only on macroeconomic fundamentals are unlikely to be very successful and that there is no clear tradeoff between reduced exchange rate volatility and macroeconomic stability.
515 citations