|
|
|
|
||||
|
||||
Liquidity, Risk Appetite and Exchange Rate Movements during the Financial Crisis of 2007-2009C. H. HuiHong Kong Monetary Authority - Research Department Hans GenbergUniversity of Geneva - Graduate Institute of International Studies (HEI) T. K. ChungHong Kong Monetary Authority - Research Department June 29, 2009 Hong Kong Monetary Authority Working Paper No. 11/2009 Abstract: Given the deleveraging process in the banking sector, banks were reluctant to lend funds in the inter-bank market because of uncertainty about their own future need for funds during the financial crisis of 2007-2009. Aggregate liquidity then declined. This paper investigates the impact of the market-wide liquidity risk and carry-trade incentives on exchange rate movements. The results suggest that liquidity risk measured by the spread between Libor and the overnight index swap rate was a significant factor affecting the exchange rate movements of the euro, the British pound and the Swiss franc, while carry trades were important for the yen, the Australia dollar and the New Zealand dollar.
Number of Pages in PDF File: 23 Keywords: Sub-prime crisis, carry trades, liquidity, leverage JEL Classification: F31, F32, F33 working papers seriesDate posted: June 30, 2009 ; Last revised: August 26, 2009Suggested CitationContact Information
|
|
|||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo3 in 1.297 seconds
