What explains global exchange rate movements during the financial crisis?

Abstract

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Oil, gold, US dollar and stock market interdependencies: a global analytical insight

“…On the topic of uncertainty and risk aversion, there has been compelling evidence that a rise in financial market risk generally results in an appreciation of the USD (Bekaert et al, (2013) as US financial assets are perceived as safe and liquid, triggering what has been referred to as FTS (flight-to-safety) phenomenon (Fratzscher 2009). Oil price volatility has been also shown to increase in period of increased uncertainty ( Van Robays 2016).…”

UK imports, third country effect and the global financial crisis: Evidence from the asymmetric ARDL method

“…The second factor is the size of the foreign exchange (FX) reserves. As Fratzscher (2009) shows, the currencies of countries with FX reserves to GDP ratios below the cross-country average, declined by 23% on average, while the ones with higher than average reserves, depreciated only by 7% against the US dollar since the summer of 2008. Hence, countries with seemingly 'excessive' FX reserves were able to control the pressure on their respective currencies, while economies where certain reserves were accumulated for precautionary motives could not absorb the shocks caused by the financial crisis.…”

“…For example, Abiad et al During the recent financial crisis highly volatile movements across all asset classes have occurred globally, including foreign exchange markets (Fratzscher, 2009;Melvin and Taylor, 2009). Fratzscher (2009) mentions three main factors which are responsible for the higher exchange rate volatility during this period. First, countries with large financial liabilities relative to the US experienced enormous currency depreciations.…”

“…These sectors constitute more than 75% of UK import volume from these countries, respectively. 3 (Fratzscher, 2009;Melvin and Taylor, 2009). 5 This part of the study also serves as a robustness check during a period characterized by heightened exchange rate volatility.…”

Liquidity, Risk and the Global Transmission of the 2007–08 Financial Crisis and the 2010–11 Sovereign Debt Crisis

“…An emerging literature analyses the global transmission of the crisis and the question through what channels and via which market segments the transmission took place, stressing the relevance of liquidity and …nancial constraints (e.g. Tong and Wei (2009)) or of equity and FX markets (Bekaert et al (2011), Fratzscher (2009). …”