DP10325 International Currency Exposures, Valuation Effects and the Global Financial Crisis

Author(s):	Agustín Bénétrix, Philip R. Lane, Jay C Shambaugh
Publication Date:	January 2015
Keyword(s):	global financial crisis, international currency exposures, valuation effects
JEL(s):	F30, F31
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=10325

We examine the evolution of international currency exposures, with a particular focus on the 2002-12 period. During the run up to the global financial crisis, there was a widespread shift towards positive net foreign currency positions, such that relatively few countries exhibited the archetypal emerging-market ?short foreign currency? position on the eve of the global financial crisis. During the crisis, the upheaval in currency markets generated substantial currency-generated valuation effects - much of which were not reversed. There is some evidence that the distribution of valuation effects was stabilizing in the sense of showing a negative covariation pattern with pre-crisis net foreign asset positions.