DeFiPP Seminar - Georgios Georgiadis (European Central Bank)

Global uncertainty and the dollar

Abstract: 

The US dollar tends to appreciates whenever global uncertainty goes up. In this paper, we ask whether a) the co-movement is caused by global uncertainty shocks and—to the extent that it is—whether b) the ‘dollar channel’ matters for their global repecussions. In a first step, we identify global uncertainty shocks in a time-series model and establish that they cause a synchronized slowdown of the world economy and an appreciation of the dollar. Other safe-haven currencies also appreciate. Second, we construct counterfactual scenarios in which the dollar is unresponsive global uncertainty shocks and find their contractionary effect outside of the US much reduced. We obtain no such effect once we counterfactually constrain the response of other safe-haven currencies. This testifies to the special role of the dollar in the transmission of global uncertainty shocks.

 

Contact : Romain Houssa - romain.houssa@unamur.be
Télecharger : vCal