Hidden Bibliographic Details
| Other authors / contributors: | Laséen, Stefan, author, (IMF staff)
Pescatori, Andrea, author, (IMF staff)
International Monetary Fund, publisher.
International Monetary Fund. Western Hemisphere Department, issuing body.
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| ISBN: | 9781498348416
1498348416
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| Notes: | "July 2016."
At head of title: Western Hemisphere Department.
Includes bibliographical references (pages 24-26).
Description based on online resource; title from pdf title page (IMF.org Web site, viewed September 9, 2016).
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| Summary: | We investigate the drivers of dynamics of major U.S. FX bilaterals. We first construct a novel measure of FX risk premiums using Consensus exchange rate forecasts. We then use VAR analysis to show that (i) risk premium shocks play a key role in driving dynamics of the major U.S. FX bilaterals; (ii) longer-term interest differentials also matter, especially for the Canadian $ and the Euro; (iii) oil price shocks play a particularly important role for the Canadian $ (an oil exporter); and (iv) risk appetite shocks (e.g., VIX shocks) generally lead to U.S. dollar appreciation. The importance of risk premium and longer-term interest differential shocks fit well with a simple theoretical model and are supported by recent event studies.
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| Other form: | Print Version: Balakrishnan, Ravi U.S. Dollar Dynamics: How Important Are Policy Divergence and FX Risk Premiums? Washington, D.C. : International Monetary Fund,2016 9781498348416
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| Standard no.: | 10.5089/9781498348416.001
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