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The Dollar, Bank Leverage, and Deviations from Covered Interest Parity

Stefan Avdjiev (), Wenxin Du, Catherine Koch () and Hyun Song Shin

American Economic Review: Insights, 2019, vol. 1, issue 2, 193-208

Abstract: We document a triangular relationship in that a stronger dollar goes hand in hand with larger deviations from covered interest parity (CIP) and contractions of cross-border bank lending in dollars. We argue that underpinning the triangle is the role of the dollar as a key barometer of risk-taking capacity in global capital markets.

JEL-codes: F23 F31 G15 G21 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aeri.20180322
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Working Paper: The dollar, bank leverage and the deviation from covered interest parity (2016) Downloads
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