The Dollar, Bank Leverage and Real Economic Activity: An Evolving Relationship

18 Pages Posted: 15 Apr 2020

See all articles by Burcu Erik

Burcu Erik

Bank for International Settlements (BIS)

Marco J. Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department

Dubravko Mihaljek

Bank for International Settlements (BIS) - Monetary and Economic Department

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: March 17, 2020

Abstract

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

Erik, Burcu and Lombardi, Marco Jacopo and Mihaljek, Dubravko and Shin, Hyun Song, The Dollar, Bank Leverage and Real Economic Activity: An Evolving Relationship (March 17, 2020). BIS Working Paper No. 847, Available at SSRN: https://ssrn.com/abstract=3571399

Burcu Erik (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Marco Jacopo Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41612809492 (Phone)

Dubravko Mihaljek

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
36
Abstract Views
183
PlumX Metrics