a column by Andrew Lilley, Matteo Maggiori, Brent Neiman and Jesse Schreger for VOX: CEPR’s Policy Portal
The ‘exchange rate disconnect’ describes the difficulty of explaining exchange rate movements using classical models and fundamentals.
This column presents evidence of an ‘exchange rate reconnect’ – a substantial co-movement of the US dollar with global risk premia and US foreign bond purchases since the Global Crisis. Though short-lived, this relationship between these factors could shed new light on the nature of financial crises and risk.
Continue reading and see some illuminating graphs. No point in trying to reproduce them here – you would not be able to see the lines!
Labels:
US_dollar, global financial_risk, exchange_rate_disconnect, global_crisis,
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