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Autoren: 
Adrian, Tobias
Etula, Erkko
Shin, Hyun-Song
Datum: 
2015
Reihe/Nr.: 
Staff Report 750
Zusammenfassung: 
We present evidence that the growth of U.S.-dollar-denominated banking sector liabilities forecasts appreciations of the U.S. dollar, both in-sample and out-of-sample, against a large set of foreign currencies. We provide a theoretical foundation for a funding liquidity channel in a global banking model where exchange rates fluctuate as a function of banks' balance sheet capacity. We estimate prices of risk using a cross-sectional asset pricing approach and show that the U.S. dollar funding liquidity forecasts exchange rates because of its association with time-varying risk premia. Our empirical evidence shows that this channel is separate from the more familiar "carry trade" channel. Although the financial crisis of 2007-09 induced a structural shift in our forecasting variables, when we control for this shift, the forecasting relationship is preserved.
Schlagwörter: 
asset pricing
financial intermediaries
exchange rates
JEL: 
F30
F31
G12
G24
Dokumentart: 
Working Paper

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