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Attention to the tail(s): global financial conditions and exchange rate risks
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| Personen und Körperschaften: | , |
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| Titel: | Attention to the tail(s): global financial conditions and exchange rate risks/ Fernando Eguren-Martin, Andrej Sokol |
| Format: | E-Book |
| Sprache: | Englisch |
| veröffentlicht: |
Frankfurt am Main, Germany
European Central Bank
[2020]
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| Gesamtaufnahme: |
Europäische Zentralbank: Working paper series ; no 2387 (April 2020)
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| Quelle: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Zusammenfassung: | We document how the distribution of exchange rate returns responds to changes in global financial conditions. We measure global financial conditions as the common component of country-specific financial condition indices, computed consistently across a large panel of developed and emerging economies. Based on quantile regression results, we provide a characterisation and ranking of the tail behaviour of a large sample of currencies in response to a tightening of global financial conditions, corroborating (and quantifying) some of the prevailing narratives about safe haven and risky currencies. Our approach delivers a more nuanced picture than one based on standard OLS regression. We then carry out a portfolio sorting exercise to identify the macroeconomic fundamentals associated with such different tail behaviour, and find that currency portfolios sorted on the basis of net foreign asset positions, relative interest rates, current account balances and levels of international reserves display a higher likelihood of large losses in response to a tightening of global financial conditions. |
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| Umfang: | 1 Online-Ressource (circa 29 Seiten); Illustrationen |
| ISBN: |
9789289940306
9289940301 |
| DOI: | 10.2866/670577 |