Front Matter

Front Matter Page

Western Hemisphere Department

Authorized for distribution by Charles Kramer

Contents

  • Abstract

  • I. Introduction

    • A. Methodology and Data

    • B. Selecting Dates for the Decomposition

    • C. Fitting Forward Curves to Zero-coupon Rates

    • D. Obtaining a Measure of “News”

    • E. Calculating the Portion of the “News” Related to Interest Rate Differentials

    • F. Calculating the Portion of the “News” Related to Expected Monetary Policy

  • II. Results

    • A. UIP Decomposition Applied to Longer Periods during the Crisis

    • B. UIP Decomposition Applied to Our Selection of Dates

  • III. Conclusions

  • Figures

  • 1. Bilateral Exchange Rate Movements during the Financial Crisis

  • 2. Bilateral Exchange Rates During Current Recession

  • 3. Exchange Rate Volatility, 3/1/2007–4/20/2010

  • 4. Exchange Rates and Percent Changes, 1/1/2007–5/24/2010

  • 5. Brazil – U.S. Exchange Rate Profile, 10/3/2008–10/6/2008

  • 6. Brazil UIP Analysis 10/6/2008

  • 7. Brazil UIP Decomposition into Components, 10/6/2008

  • 8. Log Exchange Rate Movement Over the Crisis

  • 9. Trough to PEAK to Current Exchange Rates and Policy Rates

  • Tables

  • 1. Exchange Rate Troughs and Peaks January 1, 2007–April 1, 2010

  • 2. Decomposition Tables for Selected Dates

    • Australia

    • Brazil

    • Canada

    • European Monetary Union

    • Mexico

    • New Zealand

    • United Kingdom

  • 3. Decomposition Tables for Trough-Peak-Current Dates

    • Australia

    • Brazil

    • Canada

    • Chile

    • European Monetary Union

    • Mexico

    • New Zealand

    • United Kingdom

Interpreting Currency Movements During the Crisis: What's the Role of Interest Rate Differentials?
Author: Mr. Thomas Dowling and Nicoletta Batini