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...

Full description

Saved in:
Bibliographic Details
Published in:The American economic review 2010-03, Vol.100 (1), p.518-540
Main Authors: Lane, Philip R., Shambaugh, Jay C.
Format: Article
Language:English
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
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
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)
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.100.1.518