The Dollar, Bank Leverage and Real Economic Activity: An Evolving Relationship
18 Pages Posted: 15 Apr 2020
Date Written: March 17, 2020
The interest in how financial conditions affect real economic activity has grown since the Great Financial Crisis (GFC), not least because some of the mechanisms at play in the financial sector may have changed. We shed light on this issue by examining the empirical relationship between global Purchasing Managers' Indices, world trade and indicators of global financial conditions, with a special focus on the broad dollar index. We show that the influence of the dollar on real economic activity and global trade seems to have increased since the GFC, while that of the VIX has decreased.
Keywords: financial conditions, economic activity, world trade, dollar exchange rate, bank leverage, purchasing managers' indices, nowcasting, global supply chains
JEL Classification: C5, E2, F3, F4, F6
Suggested Citation: Suggested Citation