Andrew Lilley, Matteo Maggiori, Brent Neiman, Jesse Schreger, 24 January 2020

The ‘exchange rate disconnect’ describes the difficulty of explaining exchange rate movements using classical models and fundamentals. This column presents evidence of an ‘exchange rate reconnect’ – a substantial co-movement of the US dollar with global risk premia and US foreign bond purchases since the Global Crisis. Though short-lived, this relationship between these factors could shed new light on the nature of financial crises and risk.

Daniel Leigh, Weicheng Lian, Marcos Poplawski-Ribeiro, Viktor Tsyrennikov, 30 October 2015

A number of studies argue that exchange rates matter far less than they used to for trade, or even that they have disconnected altogether. This column presents new research suggesting that, in fact, there is little sign of a disconnect in the relationship between exchange rates and exports and imports; exchange rates still matter for trade. The findings indicate that 10% real effective exchange rate depreciation implies, on average, a 1.5% of GDP increase in real net exports.

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