Today, we’re fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and author of the newly published Currency Politics: The Political Economy of Exchange Rate Policy (Princeton University Press, 2015). This post is based upon a portion of that book.
Category Archives: exchange rates
Some Implications of the Dollar’s Rise
Currency appreciation will be a drag; this implies a policy of slower monetary tightening is in order
“Uncovered Interest Parity and Monetary Policy Near and Far from the Zero Lower Bound”
Why do interest rate differentials point in the wrong direction for subsequent exchange rate changes at short horizons, and not at long? And why have interest differentials at long maturities failed in recent years to predict subsequent exchange rate changes as well as in the past, especially for interest rates near the zero lower bound. Those are two topics taken up in a recent paper by myself and Yi Zhang (University of Wisconsin).
Switzerland drops its currency peg
The Swiss National Bank stunned markets on Thursday with an abrupt decision to abandon its commitment since 2011 to hold the Swiss franc at 1.20 francs/euro, as a result of which the franc appreciated almost 20% within the space of a few minutes.
The SNB Removes the Cap
Commenting on what has been termed “Francogeddon” and a “tsunami” as well as consequent mayhem, Joe Weisenthal at Bloomberg/Business Week writes:
“Today the Swiss National Bank shocked the world when it announced it would remove the cap it had in place to prevent the Swiss franc from rising too high against the euro.”
The Dollar’s Recent Rise in Perspective
Russia: Seems Like Old Times
As I watch the financial meltdown in Russia (and work on a chapter on financial crises), I am pervaded by a sense of déjà vu.
Oil prices as an indicator of global economic conditions
West Texas Intermediate sold for $105 a barrel at the start of July, but ended last week at $58. The most important factor has been surging U.S. production. But another reason oil prices have slid so much is weakness in demand for the product, which may be related to a slowdown of overall world economic growth. Here I comment on the importance of that second factor.
And in Russia
Government borrowing costs are spiking.
Known Unknowns in International Finance
Implications for the dollar’s trajectory