Financial Exchange Rates and International Currency Exposures
- (pp. 518-40)
Abstract
In order to gain a better empirical understanding of the international financial implications of currency movements, we construct a database of international currency exposures for a large panel of countries over 1990-2004. We show that trade-weighted exchange rate indices are insufficient to understand the financial impact of currency movements and that our currency measures have high explanatory power for the valuation term in net foreign asset dynamics. Exchange rate valuation shocks are sizable, not quickly reversed, and may entail substantial wealth redistributions. Further, we show that many developing countries have substantially reduced their negative foreign currency positions over the last decade. (F31, F32, G15)Citation
Lane, Philip R., and Jay C. Shambaugh. 2010. "Financial Exchange Rates and International Currency Exposures." American Economic Review, 100 (1): 518-40. DOI: 10.1257/aer.100.1.518Additional Materials
JEL Classification
- F31 Foreign Exchange
- F32 Current Account Adjustment; Short-term Capital Movements
- G15 International Financial Markets