The Dollar - Mark Axis

27 Pages Posted: 13 Dec 2005

Date Written: August 1999


Over the last two decades, most European currencies have tended to weaken against the mark as the latter strengthened against the dollar. Moreover, the strength of the response of European cross-rates has tended to remain in the same order over time. I first set out the stylised facts of this phenomenon, referred to as the dollar-mark axis, and then try to identify its determinants. In addition to exchange rate policy, I examine the correlation of cyclical fluctuations and trade links (two factors suggested by the theory of optimum currency areas) and the bias of international investors in the currency composition of their portfolios.

Suggested Citation

Galati, Gabriele, The Dollar - Mark Axis (August 1999). BIS Working Paper No. 74. Available at SSRN: or

Gabriele Galati (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB

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