This paper studies the impact of political risk on exchange rates. We focus on the Brexit Referendum as it provides a natural experiment where both exchange rate expectations and a time-varying political risk factor can be measured directly. We build a simple portfolio model which predicts that...

Currency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there is a lending boom before the crises. Finally, when the currency/banking...

Drawing on both macroeconomic and micro-based exchange rate models, the authors revisit the academic literature on exchange rate determination and summarize the state of knowledge about what drives movements in exchange rates. The focus is on highlighting recent advances in our understanding...

Certains pays d`Ameacute;rique latine, d`Asie et d`autres reacute;gions du monde qui ont entrepris de libeacute;raliser leurs opeacute;rations financiegrave;res et de stabiliser leur eacute;conomie en s`appuyant sur le taux de change ont vu affluer les capitaux eacute;trangers depuis 1991. Nombre...

Ex-post deviations from uncovered interest parity (UIP) realized differences between dollar returns on identical assets of different currencies equal the real interest differential plus real exchange rate growth. Among industrialized countries, UIP deviations are largely explained by...

This paper investigates empirically the relevance of external, domestic, and financial weaknesses as well as trade and financial linkages in inducing financial crises for a sample of 61 emerging market and industrial countries. A panel probit estimation finds these economic indicators to be...

A theory-consistent CVAR scenario describes a set of testable regularities capturing basic assumptions of the theoretical model. Using this concept, the paper considers a standard model for exchange rate determination and shows that all assumptions about the model's shock structure and...

A theory-consistent CVAR scenario describes a set of testable regularities one should expect to see in the data if the basic assumptions of the theoretical model are empirically valid. Using this method, the paper demonstrates that all basic assumptions about the shock structure and steady-state...

The assessment of external positions and exchange rates is a key mandate of the IMF. This paperpresents the updated External Balance Assessment (EBA) framework-a key input in the conduct ofmultilaterally-consistent external sector assessments of 49 advanced and emerging marketeconomies-following...