Back Matter


  • Adams, K., & van Deventer, D. (1994). Fitting Yield Curves and Forward Rate Curves with Maximum Smoothness. The Journal of Fixed Income, June, pp. 5262.

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Brigden, A., et al. (1997). Decomposing Exchange Rate Movements According to the Uncovered Interest Rate Parity Condition. Bank of England Quarterly Bulletin, May, pp. 377389.

    • Search Google Scholar
    • Export Citation
  • Cassino, E., & Wallis, Z. (2010). The Zealand Dollar Through the Global Financial Crisis. Reserve Bank of New Zealand: Bulletin, September, Vol. 73, No. 3, pp. 20-30.

    • Search Google Scholar
    • Export Citation
  • Chaboud, A., & Wright, J. (2003). Uncovered Interest Parity: It Works, But Not for Long. Federal Reserve International Finance Discussion Papers, January, No. 752.

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Federal Reserve Bank of St. Louis (2009). The Financial Crisis Timeline. Retrieved from:

  • Fisher, P., Tanna, S., Turner, D., Wallis, K., & Whitley, J. (1990). Econometric Evaluation of the Exchange Rate. Economic Journal, 100, pp. 1,23044.

  • Frankel, J., & Poonawala, J. (2006). The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies. NBER Working Paper, August, No. W12496.

    • Search Google Scholar
    • Export Citation
  • Fratzcher, M. (2009). What Explains Global Exchange Rate Movements During the Crisis? European Central Bank Working Paper Series, June, No. 1060.

    • Search Google Scholar
    • Export Citation
  • Gurkaynak, R., et al. (2007). The U.S. Treasury Yield Curve 1961 to the Present. Journal of Monetary Economics, November, pp. 22912304.

  • Kohler, M. (2010). Exchange Rates During Financial Crises. Bank of International Settlements Quarterly Review, March, pp. 3950.

  • Krippner, L. (2006). A Yield Curve Perspective on Uncovered Interest Parity. University Of Waikato: Working Papers in Economics, 06/16.

  • Krippner, L., & Thorsrud, L. (2009). Forecasting New Zealand’s Economic Growth Using Yield Curve Information. Reserve Bank of New Zealand Discussion Papers, DP2009/18.

    • Search Google Scholar
    • Export Citation
  • Nelson, C., & Siegel, A. (1987). Parsimonious Modeling of Yield Curves. The Journal of Business, October, pp. 473489.

  • Svensson, L. (1994). Estimating and Interpreting Forward Interest Rates: Sweden 1992–1994. NBER Working Paper, September, No. 4871.


We are grateful to Rodrigo Valdès for useful conversations. All errors and omissions are ours.


Some of these countries are commodity exporters, with currencies that tend to appreciate during bull cycles in commodity markets and vice versa thus making them valuable additions to the sample.


The Federal Reserve Bank of St.Louis (2009) also chooses this date to mark the beginning of the crisis.


For Canada January 29, 2010 was used due to data availability,


In decomposing the UIP, we chose to use solely U.S. events. These tend to be the most important in driving the exchange rate in certain time zones, but for highly liquid currencies such as the Australian dollar where price discovery is important in the Asian, European, and U.S. time zones, the incorporation of local news effects could also be important. Therefore, the interpretation of our results warrants particular caution.


New Zealand rates were kindly provided by Leo Krippner at Reserve Bank of New Zealand.


October 6, 2008 was a Monday so the preceding trading day was Friday, October 3, 2008.


Since Mexico began using the overnight lending rate as a policy tool only in 2008, we use the 28-day TIIE rate.


Monetary policy rates in Brazil, Chile and Mexico, when their currencies hit their lowest value against the U.S. dollar during the crisis, ranged between levels of 8 and 13 percent. An exception is the policy rate in the Euro Area which was at 3 ¼ percent when the euro hit is lowest value against the U.S. dollar (i.e. on November 20, 2008) during the crisis.


One could argue that the U.S. and Euro Area economic recoveries looked to be picking up at that stage, as indicated by the strengthening in the U.S. and European equity markets. Hence, the appreciation in the New Zealand and Australian dollars could have also been linked to spillover effects from an improvement in the outlook for the major developed economies including Asia.


Earlier in the week, the Fed had taken steps that potentially made trillions of dollars available to banks and the nation’s leading businesses. That came on top of the controversial US$700 billion Wall Street bailout approved by Congress on the same week.

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