Quotation Della Corte, Pasquale, Sarno, Lucio, Schmeling, Maik, Wagner, Christian. 2021. Default expectations and currency movements. VoxEU, 17.05.21


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Abstract

In fixed exchange rate systems, default risks tend to have devastating effects on currencies, usually leading to sharp devaluations. However, little is known about the relationship between default expectations and exchange rates in floating rate regimes. This column uses data from a broad set of currencies to uncover a strong link between exchange rate movements and sovereign risk across all exchange rate regimes. This relationship is largely caused by countries’ exposure to global sovereign risk factors and shown to be driven by changes in default expectations.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Magazine/newspaper article
Language English
Title Default expectations and currency movements
Title of journal VoxEU
Year 2021
Date May 17, 2021
URL https://voxeu.org/article/default-expectations-and-currency-movements

Associations

People
Wagner, Christian (Details)
External
Della Corte, Pasquale (Imperial College London, United Kingdom)
Sarno, Lucio (University of Cambridge, United Kingdom)
Schmeling, Maik (Goethe University Frankfurt, Germany)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5361 Financial management (Details)
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