Exchange rate movements are difficult to predict but there appear to be discernible patterns in how currencies jointly appreciate or depreciate against the dollar. In this paper, we study the dependence structure of a number of exchange rate pairs against the dollar. We employ a conditional...

Cagan's classic currency ratio suggests that underground economic activity in the U.S. surged starting in 1994. In contrast, we show that a ratio adjusted to take care of two distorting developments--retail sweep programs and overseas demand for U.S. currency--did not surge, and that movements...