Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249901 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2628
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
How does global risk impact the world economy? In taking up this question, we focus on the dollar's role in the international adjustment mechanism. First, we rely on high-frequency surprises in the price of gold to identify the effects of global risk shocks in a Bayesian Proxy VAR model. They cause a synchronized contraction of global economic activity and appreciate the dollar. Other key financial indicators adjust in line with pre-dictions of recent theoretical work. Second, we illustrate through counterfactuals that the dollar appreciation amplifies the adverse impact of global risk shocks outside of the US via a financial channel.
Subjects: 
US dollar exchange rate
global risk shocks
Bayesian proxy structural VAR,minimum relative entropy
counterfactual
JEL: 
F31
F42
F44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4915-6
Document Type: 
Working Paper

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