It is surprisingly difficult to find economic variables that strongly co-move with exchange rates, a phenomenon codified in a large literature on "exchange rate disconnect." We demonstrate that a variety of common proxies for global risk appetite, which did not co-move with exchange rates prior...

The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and...

Undesirable real effects have been attributed to floating exchange rates in general, and the 1980-83 appreciation of the dollar in particular.In the appreciating country, the U.S., export industries lose competitiveness and so output falls. In the other country, say Europe, the exchange rate...

The optimal-diversification model of investors' portfolio behavior can give a linear relationship between the exchange risk premium and the conditional exchange rate variance. This note surveys recent empirical work that allows for the conditional variance itself, and therefore the risk premium,...

Survey data on exchange rate expectations are used to divide the forward discount into expected depreciation and a risk premium. Our starting point is the common test oh whether the forward discount is an unbiased predictor of future changes in the spot rate. We use the surveys to decompose the...

Several recent developments have inspired us to consider a non-standard model of the dollar as a speculative bubble without the constraint of fully rational expectations: (1) the dollar continued to rise in 1984 after real interest rate differentials and other fundamentals began moving the wrong...

Survey data provide a measure of exchange rate expectations that is superior to the commonly-used forward exchange rate in the respect that it does notinclude a risk premium. We use survey data and the technique of bootstrapping to test a number of propositions of interest. We are able to reject...

This paper examines two related issues: (a) the implicit methodology used by the U.S. Treasury in determining whether China and America's other trading partners manipulate their exchange rates, and (b) the nature of the Chinese exchange rate regime since July 2005. On the first issue, we...

We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation. We examine...