Understanding the Strength of the Dollar

41 Pages Posted: 22 Sep 2022

See all articles by Zhengyang Jiang

Zhengyang Jiang

Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

Robert Richmond

New York University (NYU) - Department of Finance

Tony Zhang

Board of Governors of the Federal Reserve System

Date Written: September 5, 2022

Abstract

We link the sustained appreciation of the U.S. dollar from 2011 to 2019 to international capital flows driven by primitive economic factors. We show that increases in foreign investors’ net savings, increases in U.S. monetary policy rates relative to the rest of the world, and shifts in investor demand for U.S. financial assets contributed approximately equally to the dollar’s appreciation. We then quantify the impact of potential future large-scale U.S. asset sales by investors in various regions on the value of the U.S. dollar.

Keywords: Dollar, Exchange Rate, Capital Flows, Asset Demand System

Suggested Citation

Jiang, Zhengyang and Richmond, Robert and Zhang, Tony, Understanding the Strength of the Dollar (September 5, 2022). Available at SSRN: https://ssrn.com/abstract=4210797 or http://dx.doi.org/10.2139/ssrn.4210797

Zhengyang Jiang

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

HOME PAGE: http://sites.google.com/site/jayzedwye/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert Richmond (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Tony Zhang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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