EconPapers    
Economics at your fingertips  
 

Global risk and the dollar

Georgios Georgiadis, Gernot Müller and Ben Schumann

No 2628, Working Paper Series from European Central Bank

Abstract: How does global risk impact the world economy? In taking up this question, we focus on the dollar’s role in the international adjustment mechanism. First, we rely on high-frequency surprises in the price of gold to identify the effects of global risk shocks in a Bayesian Proxy VAR model. They cause a synchronized contraction of global economic activity and appreciate the dollar. Other key financial indicators adjust in line with pre-dictions of recent theoretical work. Second, we illustrate through counterfactuals that the dollar appreciation amplifies the adverse impact of global risk shocks outside of the US via a financial channel. JEL Classification: F31, F42, F44

Keywords: Bayesian proxy structural VAR; counterfactual; global risk shocks; minimum relative entropy; US dollar exchange rate (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-cwa, nep-opm and nep-rmg
Note: 2435756
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2628~1f46b7ba26.en.pdf (application/pdf)

Related works:
Working Paper: Global Risk and the Dollar (2023) Downloads
Working Paper: Global Risk and the Dollar (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212628

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2024-04-01
Handle: RePEc:ecb:ecbwps:20212628