Financial Exchange Rates and International Currency Exposures

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 unders...

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Bibliographic Details
Published inThe American economic review Vol. 100; no. 1; pp. 518 - 540
Main Authors Lane, Philip R., Shambaugh, Jay C.
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.03.2010
Subjects
American dollar
Balance sheets
Capital gains
Currencies
Currency
Depreciation
Developing countries
Economic indices
Exchange rates
Financial analysis
Financial liabilities
Foreign assets
Foreign exchange rates
Foreign investment
International currency market
International economics
LDCs
Liability
Macroeconomics
Monetary economics
Shorter Papers
Studies
Valuation
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Summary: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)
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.100.1.518