The Dollar, Bank Leverage, and Deviations from Covered Interest Parity
- (pp. 193-208)
Abstract
We document a triangular relationship in that a stronger dollar goes hand in hand with larger deviations from covered interest parity (CIP) and contractions of cross-border bank lending in dollars. We argue that underpinning the triangle is the role of the dollar as a key barometer of risk-taking capacity in global capital markets.Citation
Avdjiev, Stefan, Wenxin Du, Cathérine Koch, and Hyun Song Shin. 2019. "The Dollar, Bank Leverage, and Deviations from Covered Interest Parity." American Economic Review: Insights, 1 (2): 193-208. DOI: 10.1257/aeri.20180322Additional Materials
JEL Classification
- F23 Multinational Firms; International Business
- F31 Foreign Exchange
- G15 International Financial Markets
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages