US Shocks and Global Exchange Rate Configurations

WO R K I N G PA P E R S E R I E S
N O 8 3 5 / N OV E M B E R 2 0 0 7
US SHOCKS AND
GLOBAL EXCHANGE
RATE CONFIGURATIONS
by Marcel Fratzscher
WO R K I N G PA P E R S E R I E S
N O 8 35 / N OV E M B E R 20 0 7
US SHOCKS AND GLOBAL

EXCHANGE RATE
CONFIGURATIONS 1
by Marcel Fratzscher 2
In 2007 all ECB

publications
feature a motif
taken from the
20 banknote.
This paper can be downloaded without charge from

http://www.ecb.europa.eu or from the Social Science Research Network
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1 Paper prepared for the 46th Panel of Economic Policy. I would like to thank the editor, Philippe Martin, and an anonymous referee for
comments. I am also grateful for comments and discussions to Geert Bekaert, Thierry Bracke, Matthieu Bussiere, Menzie Chinn,
Michael Ehrmann, Charles Engel, Jon Faust, Michael Fidora, Steve Kamin, Nelson Mark, Frank Moss, Chiara Osbat,
Georges Pineau, Roberto Rigobon, Michael Sager, Lucio Sarno, Bernd Schnatz, Jay Shambaugh, Martin Skala,
Frank Smets, Roland Straub, Christian Thimann, Frank Warnock, Shang-Jin Wei, Atze Winkler and
Jon Wongswan as well as seminar participants at the ECB, HEI Geneva and the NBER IFM
Summer Institute 2007. The views expressed in this paper are those of the author and do
not necessarily reflect those of the European Central Bank.
2 European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany;
e-mail: Marcel.Fratzscher@ecb.int
European Central Bank, 2007

Address
Kaiserstrasse 29
60311 Frankfurt am Main, Germany
Postal address
Postfach 16 03 19
60066 Frankfurt am Main, Germany
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Any reproduction, publication and
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part, is permitted only with the explicit
written authorisation of the ECB or the
author(s).
The views expressed in this paper do not
necessarily reflect those of the European
Central Bank.
The statement of purpose for the ECB
Working Paper Series is available
from the ECB website, http://www.ecb.
europa.eu/pub/scientific/wps/date/html/
index.en.html
ISSN 1561-0810 (print)
ISSN 1725-2806 (online)
CONTENTS
Abstract
Non-technical summary
1 Introduction
2 Data
2.1 Macroeconomic and
monetary policy shocks
2.2 Trade versus finance and the US dollar
11
3 Global distribution of US shocks

3.1 Benchmark model and results
for US dollar and euro
3.2 Heterogeneity of effects of
US dollar shocks
3.3 Robustness and extensions
13
11
12
13
15
17
4 Evolution over time in heterogeneity

and in contributions to US dollar adjustment
4.1 Evolution of heterogeneity over time
4.2 Contributions of currencies to
effective US dollar adjustment
19
19
20
5 Channels and determinants

5.1 The role of monetary policy
5.2 The role of real and financial integration
22
22
25
6 Conclusions
28
References
31
Appendix: Variable definitions and sources
35
Tables and figures
36
European Central Bank Working Paper Series
56
ECB
Working Paper Series No 835
November 2007
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November 2007
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November 2007
25
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November 2007
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November 2007
27
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November 2007
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November 2007
29
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November 2007
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34
ECB
November 2007
Appendix
A. 1: Variable definitions and sources

Variable definition:
US and euro area macroeconomic news/shocks surprise
components of macroeconomic announcements on days when
they are released, for 12 US macroeconomic variables and 38
euro area variables
US monetary policy shocks change of the Fed funds futures
rates in the 30 minutes around FOMC policy announcements on
FOMC meeting days
Exchange rates Log changes in daily spot exchange rates
Source:
Reuters, MMS, S&P
International, Bloomberg
Grkaynak, Sack, and
Swanson (2005)
Bloomberg, BIS,
Datastream and national
against the US dollar or NEER
sources
Trade the sum of imports and exports of goods and services IFS, IMF
between country i and the United States or the rest of the world
(ROW), as a ratio of GDPs of country i and the US or ROW
FDI stocks sum of FDI asset and liability holdings between UNCTAD
country i and the United States or the rest of the world, as a
ratio of GDPs of country i and the US or ROW
Portfolio equity and portfolio debt stocks sum of asset and Coordinated Portfolio
liability holdings, averaged over 2001-2003, between country i Investment Survey (CPIS),
and the United States or the rest of the world, as a ratio of IMF
GDPs of country i and the US or ROW
Cross-border loans sum of asset and liability holdings of International Locational
claims of banks between country i and the United States or the Banking Statistics (ILB),
rest of the world, as a ratio of GDPs of country i and the US or BIS
ROW
Stock market capitalization stock market capitalization Datastream and IFS
relative to domestic GDP
Exchange rate regime dummy equal to zero if a countrys de Shambaugh (2004), Klein
facto exchange rate is fixed and one if it is de facto flexible
and Shambaugh (2006),
checked for consistency
with Reinhart and Rogoff
(2004), authors additions
GDP correlation bilateral correlation of annual real GDP IFS, IMF and OECD
growth rates between a particular country and the United States
over the period 1980-2003
ECB
November 2007
35
Figure 1: Distribution of US shocks on bilateral US dollar exchange rates

A. All exchange rates
-1
5Frequency
10
Frequency
5
10
0
0
-2
0
coefficient
15
15
10
Frequency
5
10
Frequency
5
0
-.5
0
coefficient
-.15
.5
Consumer confidence
-.05
0
coefficient
10
Frequency
4
6
8
2
-.02
0
coefficient
.02
0
0
.1
coefficient
-.6
.2
-.4 -.2 0
coefficient
.2
.4
Frequency
5
Frequency
10 15
10
20
Retail sales
Frequency
10 15
5
0
0
.5
coefficient
-.1
Housing starts
20
10
Frequency
8
6
4
2
0
-.5
-.2
PPI
CPI
-1
.4
GDP
Frequency
5
10
-.04
0
.2
coefficient
-.6
-.4 -.2 0
coefficient
.2
-1
0
coefficient
-.2
Trade balance
0
-2
-.4
.05
Frequency
10
5
Frequency
4
6
8
10
15
Unemployment
-.1
15
-4
Non-farm payroll employment
ISM - NAPM
Industrial production
Monetary policy
-.004
.4
-.002
0
coefficient
.002
-.3
-.2
-.1
0
.1
coefficient
.2
B. Only flexible exchange rates

Monetary policy
10
Frequency
4
6
8
2 Frequency
4
6
8
10
15
Frequency
5
10
-.4
-.2
0
.2
coefficient
-.15
.4
-.2
-.1
0
coefficient
.1
.2
GDP
-.04
1.5
-.02
0
.02
coefficient
-.15 -.1 -.05 0

.05
coefficient
.04
PPI
Housing starts
-.5
0
coefficient
.5
15
Frequency
5
10
0
.5
coefficient
2
-.2
-.1
0
.1
coefficient
.2
0
-1
-.5
Retail sales
Frequency
4
6
Frequency
4
6
8
10
CPI
-1
.1
10
0
.5
1
coefficient
Frequency
4
6
8
-.5
Frequency
5
10
Frequency
5
-.3
.05
10
10
10
Frequency
4
6
8
-.05
0
coefficient
Trade balance
Consumer confidence
Unemployment
-.1
Frequency
5
-3
-2
-1
coefficient
15
-4
Frequency
2
4
ISM - NAPM
-.001
0
.001
coefficient
.002
-.1
-.05
0
.05
coefficient
.1
Notes: The figure shows the distribution of the coefficient E of the effect of US shocks on the 64 bilateral US dollar
exchange rates in the sample, based on model (1). The vertical axis shows how many of the exchange rates
responses are in a particular coefficient bin.
36
ECB
November 2007
50
60
70
80
Figure 2: Share and weight of floating currencies in US dollar NEER (in %)
1980
1985
1990
share of floaters
1995
2000
2005
weight of floaters
Notes: The light/green line in the figure shows the evolution of the share of floating currencies defined as
countries with either de facto managed floats or de facto free floats as a percentage of all 64 currencies
included in the analysis. The dark/red line shows the combined weight of all de facto floating currencies in
the US dollar NEER basket.
ECB
November 2007
37
Figure 3: Evolution of mean and heterogeneity of effects of US shocks

A. All exchange rates
ISM - NAPM
.1
2005
1985
1990
2000
.2
.1
0
-.1
2005
.2
0
.4
.2
.3
.5
.4
2000
1985
1990
1995
2000
2005
0
-.2
1985
2005
.3
.2
.1
1995
2005
.15
-.05
. 2000
PPI
1990
2000
.1
1995
CPI
1985
1995
GDP
.05
1990
2005
1990
1990
1995
2000
1990
2005
Housing starts
1995
. 2000
2005
Retail sales
.02 .04 .06 .08 .1
2000
1985
2005
-.02 -.01 0
1995
. 2000
.2
.01 .02 .03
1.5
1
.5
0
1990
1995
Trade balance
Consumer confidence
Unemployment
1985
1990
2005
-.1
1995
-.1
. 2000
1995
-.0005 0 .0005.001.0015.002
1990
-.2
-2
-.1
-.05
.1
.1
.05
.2

.3
.3
Monetary policy
1985
1990
1995
2000
2005
1985
1990
1995
2000
2005
B. Only flexible exchange rates

ISM - NAPM
.3
.2
.05
.2
0
1985
2005
0
-.1
-.2
1990
1995
2000
1990
2005
Consumer confidence
. 2000
2005
1985
1990
Trade balance
1995
2000
2005
GDP
.4
.1
2000
1990
2005
1995
CPI
2005
-.2
1985
2000
2005
1990
. 2000
2005
1985
1990
2000
2005
.1
.001
0
1985
1990
1995
2000
2005
1985
1990
1995
-.05
1995
-.0005
-.2
-.1
1995
Retail sales
.0005
.2
.1
.4
.2
1995
Housing starts
.3
.6
PPI
1990
-.4
. 2000
-.1 -.05
1995
.05
1990
1985
-.04
.2
.4
-.02
.6
.05
.8
.02
.04
Unemployment
1995
.2
. 2000
.15
1995
-.1
-.1
-.05
0
-2
1990
.1
.1
.1
Monetary policy
2000
2005
1985
1990
1995
2000
2005
Notes: The figure shows the mean (light/green line) and the standard deviation/heterogeneity (dark/red line) of the
coefficients for US shocks across the 64 bilateral US dollar exchange rates in the sample. The coefficients are timevarying, based on a recursive estimation of model (1) for each currency, adding one year of data sequentially.
38
ECB
November 2007
ECB
November 2007
39
15 20 25 30 35 40
1980 1985 1990 .1995 2000 2005
Hong Kong dollar
1980 1985 1990 .1995 2000 2005
Australian dollar
1980 1985 1990 .1995 2000 2005
Canadian dollar
1980 1985 1990 .1995 2000 2005
Thai baht
1980 1985 1990 .1995 2000 2005
Mexican peso
1980 1985 1990 .1995 2000 2005
Japanese yen
1980 1985 1990 .1995 2000 2005
Argentinian peso
1980 1985 1990 .1995 2000 2005
Taiwan dollar
1980 1985 1990 .1995 2000 2005
Chilean peso
1980 1985 1990 .1995 2000 2005
Brazilian real
1980 1985 1990 .1995 2000 2005
Chinese yuan
1980 1985 1990 .1995 2000 2005
UK pound
Notes: The figure shows the conditional contribution (2.a) (dark/red line), the unconditional contribution (2.b) (light/green line), as well as the trade weight (dashed/blue line) for
16 of the main currencies in the US NEER over the period 1980-2006, using recursive parameter estimates and time-varying trade weights.
1980 1985 1990 .1995 2000 2005
Malaysian ringgit
1980 1985 1990 .1995 2000 2005
Korean won
1980 1985 1990 .1995 2000 2005
Swiss franc
1980 1985 1990 .1995 2000 2005
Euro
.5 1 1.5 2
0
1.5 2 2.5 3 3.5 4
Figure 4: Contributions to US dollar NEER adjustment
.2 .4 .6 .8
0
0 1 2 3 4 5
0 .5 1 1.5 2 2.5
5 10 15 20
0
.5 1 1.5 2 2.5
3
1
0
10 15 20 25 30
15
5
2
0
10
8 10 12
6
4
15
10
5
0
8
6
4
2
0
.2 .4 .6 .8
0
Figure 5: Time-varying parameters estimates USD/EUR exchange rate

Monetary policy
.2
.1
2005
1990
1995
2000
2005
2000
. 2000
1990
1995
2000
2005
-.5
1985
2005
1990
1995
2000
1990
2005
Housing starts
. 2000
2005
1985
1990
2000
2005
1990
1995
-.2
-.1
-.001
1985
-.002
1995
-.6
-.5
-.4
-.2
.5
.1
.2
.4
1995
Retail sales
.001
PPI
1985
GDP
-.1
1995
CPI
1.5
2005
-.2
1990
2005
. 2000
Trade balance
-.3
1995
1995
-.1 -.08 -.06 -.04 -.02 0
2
1.5
1
.5
0
1990
1990
Consumer confidence
Unemployment
1985
-.4
-.2
-.3
1985
-1
. 2000
-1.5
1995
.2
1990
-8
-.6
-6
-.4
-.2
-.1
-.2
-4
ISM - NAPM
0
-2
2000
2005
1985
1990
1995
2000
2005
1985
1990
1995
2000
2005
Notes: The figure shows the coefficients for US shocks on the bilateral US dollar-euro exchange rate,
estimating model (1) recursively by adding one year of data sequentially.
40
ECB
November 2007
ECB
November 2007
41
interest rate diff.

-2 -1 0
1
-3
.2
interest rate diff.

0
.1
-.1
-1
-2
-4
-.5
0
.5
exchange rate
CPI
-1
0
1
exchange rate
Unemployment
-2
0
2
exchange rate
Monetary policy
-.6
-.4
-.2
exchange rate
0
.1
exchange rate
.2
.01
-.05 0
.05
exchange rate
Housing starts
-.1
Trade balance
-.1
-.05
0
exchange rate
.1
.05
-.001 -.0005 0
.0005 .001
exchange rate
-.15
-.15
ISM - NAPM
-.1
-1
-.3
-.6 -.4 -.2

exchange rate
-.05
0
exchange rate
Retail sales
-.8
GDP
-.2
-.1
0
exchange rate
.05
.1
Nonfarm p. employment
Notes: The figure shows the coefficients for US shocks on bilateral US dollar exchange rates versus on short-term interest rate differentials (foreign minus US rates).
Light/green dots are coefficients for countries with a high degree of financial integration, red/dark diamonds are for countries with a low degree of financial integration.
-.1
PPI
-.04 -.03 -.02 -.01 0

exchange rate
Consumer confidence
-.8
Figure 6: Response to US shocks of interest rate differentials versus exchange rates
interest rate diff.

0
.5
-.5
interest rate diff.

-.1 -.05 0 .05 .1 .15
interest rate diff.
-.02-.015 -.01-.005 0 .005
.2
interest rate diff.
-.1
0
.1
-.2
interest rate diff.

-.04 -.03 -.02 -.01 0 .01
interest rate diff.
-.04 -.02 0
.02 .04
interest rate diff.
-.002 -.001 0 .001 .002
interest rate diff.

-.08 -.06 -.04 -.02 0 .02
interest rate diff.
-.2-.15-.1-.05 0 .05
interest rate diff.
-.06 -.04 -.02 0 .02 .04
financial integration
0
.5
1
1.5
trade integration
.2 .4 .6 .8
-4
-4
-4
-2
0
2
4
exchange rate response
Monetary policy
-2
0
2
4
Monetary policy
-2
0
2
4
Monetary policy
-.2
-.15
-.15
0
.2
.4
.6
ISM - NAPM
-.1
-.05
0
.05
ISM - NAPM
-.1
-.05
0
.05
ISM - NAPM
-.2
-.1
0
.1
-.2
-.1
0
.1
-.4
-.2
0
.2
Nonfarm p employment
-.3
-.3
-.8
-.8
-.8
-.6 -.4 -.2

0
.2
GDP
-.6 -.4 -.2

0
.2
GDP
-.6 -.4 -.2

0
.2
GDP
Figure 7: Financial vs. real integration and exchange rate response to US shocks
Notes: The figure shows the coefficients for four selected US shocks on bilateral US dollar exchange rates (horizontal axis) against (a) financial integration with the rest of
the world, defined for each country as its sum of financial assets and liabilities over GDP (first row), (b) trade with the rest of the world, defined as the sum of exports and
imports over GDP (second row), and (c) business cycle correlation, defined as GDP growth correlation with the US (third row).
GDP correlation w US
-.2 0 .2 .4 .6 .8
.5
1
1.5
0
1
trade integration
.2 .4 .6 .8
0
-.2 0 .2 .4 .6 .8
.5
1
1.5
0
1
trade integration
.2 .4 .6 .8
0
-.2 0 .2 .4 .6 .8
.5
1
1.5
0
1
trade integration
.2 .4 .6 .8
0
-.2 0 .2 .4 .6 .8
42
ECB
November 2007
ECB
November 2007
43
MoM % change
Quarterly YoY % change
MoM change (100,000)
in %
MoM % change
Hours worked per week
in %
Definition / Unit
in USD billion
5. Net exports
Trade balance
274
272
276
196
179
272
272
65
257
263
272
92
177
Obs.
1.367
0.093
0.253
1.590
3.889
72.94
0.209
0.337
0.636
0.105
0.457
0.078
0.057
Mean
0.985
0.083
0.230
1.268
3.124
59.40
0.164
0.322
0.508
0.096
0.497
0.080
0.061
std. dev.
-18.11
0.247
0.162
51.57
101.3
1518
0.161
2.050
1.018
5.706
0.302
27.84
5.317
Mean
1985-2004
-61.31
0.294
0.311
55.74
108.6
2035
0.300
3.217
1.529
4.750
0.406
33.76
5.250
Mean
2005-2006
Announcement
2.823
0.209
0.497
2.713
6.533
87.81
0.486
2.972
1.326
0.115
0.945
0.091
0.109
Mean
6.600
0.285
0.688
10.23
20.73
175.1
0.644
1.236
1.753
0.156
1.497
0.687
0.209
std. dev.
Announcement change
Sources: MMS International, S&P and Bloomberg for macroeconomics variables; Grkaynak, Sack, Swanson (2005) for the monetary policy variable.
MoM % change
MoM % change
index (around 50)

index (around 100)
Monthly, in 1000
CPI
PPI
4. Prices
NAPM / ISM
Consumer confidence
Housing starts
3. Confidence / forward-looking
GDP
NF payroll employment
Unemployment
Retail sales
Workweek
2. Real activity
Monetary policy
1. Monetary policy
Variable
Surprise / shock
Table 1: Summary statistics of macroeconomic surprises and announcements
Table 2: Effects of US shocks on US dollar and euro

NEER
Bilateral
USD/EUR
USD
USD
excl. EUR
EUR
1. Monetary policy
Monetary policy
-4.262
1.344
0.613
-1.108
(0.884)***
(0.474)***
(0.533)
(0.394)***
2. Real activity
GDP
Unemployment
Retail sales
Workweek
-0.389
0.222
0.182
-0.181
(0.136)***
(0.089)**
(0.104)*
(0.090)**
-0.605
0.034
-0.108
-0.183
(0.151)***
(0.098)
(0.122)
(0.100)*
-0.299
0.047
-0.015
-0.055
(0.056)***
(0.025)*
(0.029)
(0.025)**
0.968
-0.226
-0.040
0.265
(0.321)***
(0.154)
(0.171)
(0.148)*
-0.086
-0.004
-0.023
-0.004
(0.074)
(0.031)
(0.033)
(0.026)
-0.778
-0.068
-0.280
-0.156
(0.931)
(0.287)
(0.471)
(0.348)
-0.087
0.008
-0.011
-0.025
(0.024)***
(0.014)
(0.017)
(0.013)*
NAPM / ISM
Consumer confidence
Housing starts
-0.022
0.006
0.002
-0.009
(0.008)***
(0.005)
(0.006)
(0.004)**
-0.001
0.001
0.000
0.000
(0.001)*
(0.000)*
(0)
(0)
4. Prices
CPI
PPI
5. Net exports
Trade balance
Observations
0.139
0.231
0.324
0.084
(0.344)
(0.177)
(0.213)
(0.185)
0.090
0.066
0.101
-0.051
(0.118)
(0.069)
(0.079)
(0.058)
-0.144
0.035
0.008
-0.026
(0.025)***
(0.012)***
(0.014)
(0.012)**
5537
5525
5525
5525
Notes: Coefficient estimates are based on model (1). ***, **, * indicate statistical significance at the
99%, 95% and 90% levels, respectively.
44
ECB
November 2007
Table 3: Effect of US shocks contributions to a 1% US NEER change

(in %)
Bilateral
NEER
exchange rates
Industrialised countries:
Euro area
Canada
Japan
UK
Switzerland
Australia
Sweden
3.19
0.56
1.87
1.74
3.22
0.87
1.18
1.23
-0.69
1.01
-0.48
0.62
-1.01
0.49
Emerging market countries:

China
0.05
Mexico
-1.29
Korea
0.38
Taiwan
0.07
Malaysia
0.17
Singapore
0.23
Hong Kong
-0.04
Brazil
1.44
Thailand
0.54
India
0.09
Israel
0.31
Russia
1.59
Indonesia
0.35
Philippines
0.33
Saudi Arabia
0.00
Chile
-0.36
Argentina
-0.13
Venezuela
-0.15
Colombia
0.24
-0.99
-0.62
-0.48
0.02
-1.22
-0.08
-0.99
0.69
-0.13
-1.40
-1.05
1.67
-0.53
-0.73
n/a
-1.34
-1.48
n/a
n/a
Notes: The table shows the response of each bilateral exchange rate and each countrys NEER to a onestandard-deviation shock to each of the 13 US macroeconomic and monetary policy variables. All of
the shocks are included so as to induce a depreciation of the US dollar/appreciation of the foreign
currency. The responses are then scaled so as to account together for a 1% depreciation in the US dollar
NEER.
ECB
November 2007
45
46
ECB
November 2007
-0.528
(0.246)**
-0.147
(0.382)
-0.069
(0.032)**
0.042
(0.18)
(0.027)
-0.269
-0.312
(0.033)
(0.151)**
-0.045
0.086
(0.029)***
0.175
(0.081)**
0.009
(0.108)
0.166
(0.078)**
0.091
(0.323)
(0.079)
-0.001
0.519
5525
(0.015)
5525
-0.007
0.002
(0.071)
(0.013)
0.100
(0.061)
-0.007
0.114
(0.186)
-0.351
(0)
(0)
(0.188)*
0.000
0.000
0.011
(0.004)***
-0.009
(0.005)*
0.011
(0.014)
0.003
(0.013)
5525
(0.019)
-0.007
(0.101)
-0.127
(0.261)
-0.423
(0.000)**
-0.001
(0.007)
0.011
(0.019)
0.020
(0.582)*
1.075
(0.042)
0.023
(0.182)**
0.362
(0.034)
-0.004
(0.161)
-0.096
(0.157)**
-0.327
(0.564)
-0.701
Japan
5525
(0.019)
-0.015
(0.089)
0.005
(0.296)
-0.089
(0.001)
0.000
(0.007)
-0.009
(0.023)
-0.006
(0.466)
0.277
(0.056)
0.053
(0.249)**
-0.620
(0.054)
0.017
(0.168)
0.210
(0.122)
-0.020
(0.634)
0.415
5525
(0.021)
-0.018
(0.084)
0.060
(0.250)**
-0.497
(0.001)
0.000
(0.006)
-0.003
(0.017)
-0.010
(0.441)
0.072
(0.051)
0.027
(0.204)
-0.103
(0.042)
0.007
(0.191)
-0.176
(0.123)
-0.050
(0.806)***
2.115
Australia N.Zealand
5525
(0.023)
-0.004
(0.086)
0.118
(0.319)
-0.233
(0)
0.001
(0.021)
-0.020
(0.016)
0.000
(0.294)
-0.118
(0.037)
0.023
(0.289)
-0.081
(0.047)
0.040
(0.56)
0.707
(0.189)*
0.369
(0.543)
0.821
5525
(0.010)***
0.026
(0.061)
0.065
(0.148)
0.188
(0.000)*
0.000
(0.004)
0.004
(0.012)
0.006
(0.206)
-0.124
(0.025)
0.002
(0.129)**
-0.266
(0.021)**
0.050
(0.077)
0.001
(0.082)***
0.228
(0.359)***
1.165
Korea Hong Kong
Notes: Coefficient estimates are based on model (1). ***, **, * indicate statistical significance at the 99%, 95% and 90% levels, respectively.
Observations
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
UK
(0.493)
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Canada
Table 4: Effects of US shocks on NEER of selected countries
ECB
November 2007
47
0.190
(0.652)
(0.774)
(0.02)
(0.061)
-0.282
-0.011
-0.091
0.233
(0.123)*
0.025
(0.026)
(0.067)*
(0.324)
-0.040
(0.089)
-0.123
-0.145
(0.189)
(0.062)
-0.110
-0.044
-0.237
(0.132)*
-0.859
(0.374)**
(1.011)
6515
(0.015)
5485
-0.010
(0.023)
(0.06)
(0.097)
-0.028
0.039
(0.13)
0.090
-0.052
(0.382)
(0)
(0.001)
-0.221
0.000
(0.005)
(0.009)***
0.000
-0.004
(0.014)
(0.021)
-0.024
-0.005
-0.021
-4.345
6515
(0.026)***
-0.141
(0.115)
0.031
(0.326)
6515
(0.023)***
-0.124
(0.108)
0.037
(0.274)
0.225
(0)
(0)
0.073
0.000
(0.008)***
-0.026
(0.024)***
-0.091
(0.938)
-0.806
(0.067)
-0.017
(0.259)***
0.946
(0.057)***
-0.308
(0.155)***
-0.613
(0.125)**
-0.263
(0.856)***
0.000
(0.009)***
-0.024
(0.026)***
-0.087
(1.007)
-0.641
(0.066)
-0.065
(0.277)***
1.178
(0.061)***
-0.299
(0.140)***
-0.506
(0.118)**
-0.256
(0.874)***
-4.179
Switzerland Denmark
6515
(0.024)***
-0.070
(0.091)
-0.001
(0.252)
0.270
(0)
0.000
(0.009)
-0.008
(0.027)*
-0.045
(0.424)
-0.693
(0.06)
-0.071
(0.259)**
0.545
(0.053)***
-0.291
(0.140)**
-0.347
(0.095)
-0.092
(0.678)***
-2.039
UK
6515
(0.029)**
-0.071
(0.112)
-0.088
(0.253)
-0.365
(0.000)*
-0.001
(0.008)
-0.007
(0.021)
-0.021
(0.688)
-0.170
(0.048)
-0.008
(0.225)***
0.590
(0.050)***
-0.170
(0.145)***
-0.415
(0.121)
-0.117
(0.973)***
-2.716
Japan
5166
(0.028)
-0.041
(0.099)
0.052
(0.388)*
-0.674
(0.001)
-0.001
(0.009)
-0.015
(0.021)*
-0.041
(0.709)
-0.900
(0.056)
-0.059
(0.247)
0.165
(0.065)
-0.097
(0.146)**
-0.315
(0.172)
-0.228
(1.136)
0.251
N. Zealand
6366
(0.078)
0.101
(0.315)
-0.104
(0.872)
-0.759
(0.001)
0.001
(0.026)
-0.003
(0.061)
-0.019
(1.71)
-0.751
(0.122)
0.122
(0.903)
0.405
(0.156)
0.011
(0.425)
-0.685
(0.498)
0.077
(2.485)
-1.301
Sweden
Observations
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
Canada
-0.217
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Australia
Table 5.A: Effects of US shocks for bilateral USD exchange rates - other industrialised countries
48
ECB
November 2007
1.382
(0.869)
0.367
(0.392)
(0.111)
(0.328)
(0.851)
-0.065
(0.764)
-0.143
0.427
(0.119)*
1.259
(0.092)
(0.243)
-0.228
(0.39)
-0.121
-0.386
(0.301)
(0.339)
-0.310
-0.211
-0.058
3.717
(1.495)**
3.254
515
1385
0.110
(0.064)*
0.062
(0.277)
(0.318)
(0.082)
0.039
(0.748)
-0.142
-0.124
1.230
(0.732)*
0.000
(0.001)
0.001
(0.019)
(0.026)*
(0.001)
0.019
(0.124)
0.043
-0.117
0.026
(0.031)
2712
(0.021)
-0.004
(0.146)
0.186
(0.279)
-0.333
(0)
0.000
(0.008)
-0.002
(0.033)
0.048
(0.470)*
-0.855
(0.056)
0.067
(0.651)
-0.472
(0.053)
0.005
(0.364)
-0.453
(0.142)
0.044
(1.754)
-0.327
Chile
1363
(0.032)
-0.051
(0.149)
0.002
(0.371)
-0.076
(0)
-0.001
(0.008)
-0.003
(0.021)
0.026
(0.394)
0.013
(0.055)
-0.025
(0.391)
-0.359
(0.06)
0.013
(0.14)
-0.120
(0.178)
-0.050
(0.769)
0.788
Colombia
2277
(0.023)**
0.050
(0.145)
0.066
(0.346)*
-0.667
(0.001)
0.000
(0.01)
0.007
(0.025)
0.037
(0.76)
0.420
(0.077)
0.020
(0.265)
0.023
(0.057)
-0.087
(0.135)**
-0.332
(0.185)
-0.015
(0.843)
0.758
Mexico
1494
(0.04)
0.005
(0.172)
-0.031
(0.448)
0.116
(0.001)
0.000
(0.017)
0.022
(0.055)
0.006
(0.724)*
-1.378
(0.053)
0.061
(0.97)
0.346
(0.102)
0.009
(0.207)
0.130
(0.334)*
-0.629
(2.503)
1.425
Indonesia
1690
(0.029)
-0.018
(0.093)
0.003
(0.399)
-0.427
(0)
0.000
(0.007)
-0.012
(0.018)
-0.011
(0.234)
0.171
(0.04)
0.054
(0.376)**
0.770
(0.069)
-0.039
(0.238)
0.133
(0.15)
-0.045
(1.359)
-1.911
Korea
1842
(0.023)
-0.026
(0.134)
-0.141
(0.348)
-0.359
(0)
0.000
(0.01)
-0.007
(0.017)
-0.021
(0.271)
-0.210
(0.047)
0.044
(0.293)
0.029
(0.042)
0.037
(0.156)
-0.059
(0.3)
-0.411
(0.713)*
-1.218
1581
(0.015)
0.005
(0.079)
-0.057
(0.217)*
-0.392
(0)
0.000
(0.006)
-0.009
(0.013)
-0.021
(0.401)
-0.176
(0.025)
-0.005
(0.215)*
0.418
(0.039)**
-0.079
(0.137)
-0.136
(0.087)
-0.051
(0.699)
-0.114
Philippines Singapore
Observations
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
Brazil
(2.277)
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Argentina
1819
(0.03)
-0.038
(0.083)
-0.055
(0.275)
-0.405
(0)
0.000
(0.011)
0.001
(0.019)
-0.013
(0.335)
-0.491
(0.042)
0.013
(0.265)
0.426
(0.05)
-0.032
(0.108)
-0.005
(0.139)
-0.202
(0.906)
-1.089
Thailand
Table 5.B: Effects of US shocks for flexible bilateral USD exchange rates EME Latin America and Asia
ECB
November 2007
49
-0.286
(0.8)
(0.894)
(0.06)
-0.439
0.042
-0.257
(0.080)***
0.370
(0.349)
1.049
(0.074)**
(0.120)***
(0.577)*
-0.181
(0.156)**
(0.237)
-0.418
-0.373
(0.191)
(0.197)
-0.387
-0.290
-0.178
-1.405
(0.626)**
0.174
1819
4168
-0.074
(0.027)***
-0.091
(0.111)
(0.146)
(0.040)**
-0.001
(0.323)
0.101
-0.243
(0.397)
(0)
(0.001)
-0.305
0.000
(0.011)
0.001
-0.004
-0.025
(0.026)
(0.6)
(0.012)**
-0.037
0.508
3009
(0.03)
-0.040
(0.147)
0.106
(0.461)
-0.309
(0.001)
0.001
(0.022)**
-0.044
(0.027)***
-0.097
(0.955)
-0.737
(0.095)
-0.071
(0.400)*
0.710
(0.083)***
-0.221
(0.254)**
-0.594
(0.194)*
-0.320
(0.703)**
-1.448
Czech Rep
2664
(0.028)*
-0.051
(0.107)*
0.202
(0.435)
-0.143
(0.001)
0.001
(0.009)***
-0.032
(0.024)***
-0.099
(0.981)
-0.777
(0.08)
-0.094
(0.358)
0.393
(0.076)***
-0.297
(0.206)*
-0.367
(0.176)
-0.190
(0.883)
0.193
Estonia
3003
(0.027)***
-0.071
(0.143)
0.124
(0.582)
0.228
(0.001)
0.000
(0.009)**
-0.021
(0.039)***
-0.106
(0.787)*
-1.381
(0.137)
0.058
(0.322)**
0.761
(0.078)***
-0.270
(0.209)**
-0.456
(0.156)**
-0.357
(0.568)***
-1.668
Hungary
2664
(0.02)
-0.022
(0.089)
0.046
(0.263)
-0.136
(0)
0.000
(0.005)
-0.007
(0.02)
-0.032
(0.827)
0.303
(0.057)
-0.059
(0.234)
0.183
(0.064)***
-0.166
(0.137)*
-0.262
(0.132)
-0.108
(0.354)
0.442
Lithuania
2664
(0.016)
0.013
(0.082)
-0.030
(0.275)
0.381
(0)
0.000
(0.008)
0.011
(0.017)
0.028
(0.528)
0.198
(0.043)
0.018
(0.244)
-0.178
(0.048)***
0.171
(0.103)*
0.194
(0.116)
0.047
(0.778)
-0.659
Latvia
3002
(0.028)
-0.032
(0.108)
0.012
(0.483)
-0.253
(0.001)
0.000
(0.011)
-0.005
(0.034)
-0.028
(0.7)
-1.043
(0.059)
-0.045
(0.361)**
0.837
(0.067)
-0.043
(0.189)
-0.237
(0.16)
-0.057
(0.671)
-0.477
Poland
1819
(0.081)
0.044
(0.117)
0.088
(0.344)
-0.411
(0.001)
-0.001
(0.011)
-0.010
(0.025)
-0.032
(0.475)*
-0.867
(0.065)
0.030
(0.448)
0.461
(0.088)
-0.094
(0.104)*
-0.202
(0.2)
0.179
(0.986)
-0.964
Romania
1297
(0.009)
-0.007
(0.035)**
0.068
(0.127)
-0.161
(0)
0.000
(0.003)
-0.002
(0.019)
0.001
(0.25)
0.214
(0.018)
-0.007
(0.175)
-0.081
(0.03)
-0.034
(0.055)
-0.043
(0.057)
-0.008
(1.138)
-1.278
Russia
2897
(0.031)
-0.038
(0.12)
0.079
(0.4)
-0.206
(0.001)***
0.002
(0.025)
-0.037
(0.024)***
-0.091
(0.902)
-0.733
(0.07)
-0.090
(0.361)
0.358
(0.070)***
-0.203
(0.207)
-0.278
(0.222)
-0.022
(1.717)
1.133
Slovenia
Observations
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
Cyprus
(1.556)
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Bulgaria
2915
(0.027)***
-0.096
(0.124)
0.040
(0.381)
-0.018
(0.001)*
0.001
(0.013)*
-0.025
(0.026)***
-0.107
(0.923)
-0.798
(0.087)
-0.062
(0.341)**
0.864
(0.075)***
-0.231
(0.200)*
-0.389
(0.152)
-0.043
(0.495)**
-1.153
Slovak Rep
Table 5.C: Effects of US shocks for flexible bilateral USD exchange rates EME Europe and other
2534
(0)
0.000
(0.002)
0.001
(0.006)
-0.008
(0.000)***
0.000
(0)
0.000
(0.001)
0.001
(0.01)
0.005
(0.004)
-0.004
(0.005)
0.000
(0.002)
0.000
(0.003)
0.004
(0.01)
-0.012
(0.013)
-0.017
S. Africa
Table 6: Effects of euro area shocks on US dollar/euro exchange rate

Model with US shocks
& without
euro area shocks
& with
euro area shocks
US SHOCKS
1. Monetary policy
Monetary policy
-4.262 *** 0.884
-4.269 *** 0.877
2. Real activity
GDP
Unemployment
Retail sales
Workweek
-0.389
-0.605
-0.299
0.968
-0.086
-0.778
-0.381
-0.630
-0.292
0.981
-0.088
-0.622
***
***
***
***
0.136
0.151
0.056
0.321
0.074
0.931
***
***
***
***
0.139
0.156
0.056
0.323
0.075
0.907
NAPM / ISM
Consumer confidence
Housing starts
-0.087 *** 0.024

-0.022 *** 0.008
-0.001 * 0.001
-0.082 *** 0.023

-0.022 *** 0.008
-0.001 * 0.000
4. Prices
CPI
PPI
5. Net exports
Trade balance
0.139
0.090
0.344
0.118
-0.144 *** 0.025
0.183
0.114
0.338
0.119
-0.142 *** 0.026
EURO AREA SHOCKS

A. Euro area
Monetary policy euro area
Business climate euro area
CPI euro area
0.912 ** 0.421
0.145 *** 0.056
-2.569 *** 0.775
B. Germany
Ifo business confidence Germany
M3 Germany
PPI Germany
C. France
Industrial production France
Unemployment France
0.101 **
0.042 *
0.380 *
0.099 ** 0.045
-0.087 *** 0.018
D. Italy
Industrial orders Italy
Trade balance Italy
Observations
0.044
0.023
0.215
0.026 **
0.021 **
5537
0.011
0.009
5537
Notes: The coefficients of the left-hand column are those based on the benchmark model (1) including only US
shocks. The coefficients of the right-hand column include in addition to the US shocks also a broad set of 38 euro
area shocks (both for the euro area as an aggregate and for its three largest individual economies). Note that for
euro area shocks only those 10 shocks are shown in the table that are statistically significant. ***, **, * indicate
statistical significance at the 99%, 95% and 90% levels, respectively.
50
ECB
November 2007
Table 7: Channels role of monetary policy

Interest rate differential
US shock E
Interaction E
US shock with
interest rate diff.
1. Monetary policy
Monetary policy
-0.167
0.183
0.035
0.586
2. Real activity
GDP
Unemployment
Retail sales
Workweek
-0.231
-0.385
-0.200
0.686
-0.050
-0.381
0.083
0.097
0.031
0.176
0.036
0.285
0.061
-0.095
-0.013
-0.188
-0.018
0.284
0.111
0.084
0.035
0.171
0.059
0.264
NAPM / ISM
-0.055 *** 0.013
Consumer confidence
-0.014 ** 0.005
Housing starts
0.000
0.000
0.001
0.004
0.000
0.010
0.006
0.000
***
***
***
***
4. Prices
CPI
PPI
-0.018
0.075
0.186
0.058
0.047
-0.077
0.229
0.057
5. Net exports
Trade balance
-0.054 *** 0.013
0.025
0.015
Observations
Countries
153624
43
Notes: The parameter estimates are based on model (3), including only countries and time periods with de facto
flexible exchange rates. ***, **, * indicate statistical significance at the 99%, 95% and 90% levels, respectively.
ECB
November 2007
51
52
ECB
November 2007
-0.610
(0.509)
(0.341)
(0.032)
0.085
-0.030
0.000
(0.016)
0.527
(0.163)***
0.194
(0.092)**
-0.117
(0.029)***
-0.057
(0.017)***
-0.362
(0.108)***
(0.067)
(0.083)
(0.044)
-0.048
-0.087
-0.067
-1.267
(0.439)***
-0.624
(0.274)**
109655
64
-0.042
(0.014)***
(0.008)
(0.069)
(0.041)
-0.013
-0.011
(0.177)
0.055
-0.123
0.024
0.000
0.000
(0.088)
0.000
(0.006)
0.000
-0.003
-0.009
(0.004)**
-0.060
(0.014)***
0.001
(0.009)
-0.036
(0.008)*
0.014
(0.033)
0.052
(0.119)
-0.020
(0.000)**
0.000
(0.003)
0.001
(0.007)
-0.007
70725
44
(0.013)***
-0.055
(0.064)
-0.005
(0.164)
-0.083
0.000
0.000
(0.005)**
-0.013
(0.013)***
(0.097)
-0.066
(0.021)
-0.008
(0.114)
0.066
(0.019)**
-0.046
(0.049)
-0.004
(0.053)
0.063
(0.378)
-0.300
-8.553
(0.533)
-0.458
(2.885)
-0.926
(7.723)
5.688
(0.01)
0.007
(0.252)
-0.167
(0.692)
0.138
(11.25)
10.269
(1.49)
-0.969
(5.541)
0.942
(1.254)
0.799
(4.006)
0.239
(3.102)***
24.709
(16.322)
81260
45
(0.019)
-0.019
(0.098)
0.043
(0.253)
-0.191
0.000
0.000
(0.008)
-0.007
(0.021)**
-0.045
(0.435)*
-0.738
(0.049)
0.022
(0.204)*
0.374
(0.043)***
-0.151
(0.139)**
-0.306
(0.110)***
-0.831
(0.631)*
-1.236
US shock Interaction
FX volatility
-2.080
(0.021)**
-0.052
(0.1)
0.079
(0.244)
-0.071
0.000
0.000
(0.009)
-0.008
(0.021)*
-0.038
(0.504)
-0.524
(0.048)
-0.077
(0.242)
0.257
(0.046)***
-0.141
(0.155)*
-0.275
(0.120)*
-0.225
(0.718)***
81260
45
(0.018)
-0.002
(0.086)
-0.025
(0.219)
0.005
0.000
0.000
(0.007)
-0.006
(0.018)
-0.017
(0.396)
-0.087
(0.043)
0.033
(0.216)
0.265
(0.04)
-0.046
(0.131)
-0.126
(0.106)
0.026
(0.638)
-0.335
De jure KA openness
Notes: Coefficient estimates are based on (4) and only for flexible exchange rates. ***, **, * indicate statistical significance at the 99%, 95% and 90% levels, respectively.
Observations
Countries
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
(0.324)
-0.330
(0.033)
-0.022
(0.160)***
0.493
(0.029)***
-0.114
(0.096)***
-0.310
(0.078)***
-0.216
(0.455)***
-1.412
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Stock market capit.
FX regime
Table 8: Determinants of distribution of US dollar shocks liquidity, de jure openness and FX regimes
ECB
November 2007
53
-0.409
(0.605)
(0.367)
(0.066)
-0.202
-0.012
(0.04)
(0.29)
-0.020
0.202
0.436
(0.174)**
-0.155
(0.055)***
-0.070
(0.19)
(0.033)**
-0.236
-0.193
(0.157)
(0.111)*
-0.008
-0.175
(0.503)
(0.091)*
-2.487
(0.866)***
-0.454
72727
45
0.005
(0.025)
-0.048
(0.126)**
(0.075)
(0.015)***
0.268
(0.319)
-0.097
-0.320
0.047
(0.000)**
(0.000)**
(0.187)
0.001
(0.01)
-0.001
-0.010
(0.006)
(0.014)
-0.008
-0.075
(0.025)***
-0.007
0.224
(0.009)
-0.008
(0.038)
0.039
(0.126)
-0.107
(0.000)**
-0.001
(0.003)
-0.001
(0.007)**
-0.016
(0.145)
-0.023
(0.023)
-0.023
(0.117)**
0.282
(0.021)***
-0.085
(0.056)
-0.047
(0.056)
-0.008
81260
45
(0.143)
0.101
(0.625)
-0.615
(2.05)
1.689
(0.003)**
-0.007
(0.051)
0.007
(0.124)*
-0.710
(0.414)*
-1.289
-2.356
(0.026)
-0.023
(0.115)
0.120
(0.383)
-0.333
(0.001)**
-0.001
(0.01)
-0.002
(0.023)**
-0.051
(0.44)
-0.083
(0.075)
-0.082
(0.400)***
1.055
(0.062)***
-0.271
(0.068)**
-0.172
(0.171)
-0.037
(1.299)*
81260
45
(0.014)**
-0.028
(0.068)
-0.004
(0.167)
0.014
(0.000)*
0.000
(0.006)*
-0.011
(0.014)**
-0.030
(0.375)
-0.397
(0.033)
0.004
(0.166)*
0.293
(0.031)***
-0.085
(0.106)**
-0.259
(0.082)
-0.091
(0.481)***
222.242
-9.036
(0.057)***
-0.150
(0.243)
0.362
(0.78)
0.167
(0.001)
0.002
(0.022)
-0.024
(0.053)***
-0.197
(0.87)
-1.114
(0.142)
-0.214
(0.838)***
2.582
(0.134)***
-0.764
(0.377)*
-0.677
(0.365)
0.144
(2.659)***
71096
42
(1.404)***
3.676
(6.012)
-8.940
(19.274)
-4.199
(0.026)
-0.043
(0.547)
0.576
(1.321)***
4.842
(21.455)
27.235
(3.511)
5.283
(20.708)***
-63.419
(3.298)***
18.780
(9.298)*
16.476
(9.019)
-3.717
(65.689)***
-9.223
(0.700)**
-1.622
(3.083)
3.131
(9.163)
-2.696
(0.013)
0.014
(0.271)
-0.065
(0.640)**
-1.288
(12.454)
-6.257
(1.774)*
-3.029
(9.290)***
26.676
(1.578)***
-9.095
(4.105)*
-6.884
(4.279)
3.199
(2.716)***
69188
42
(0.011)**
-0.022
(0.053)
-0.003
(0.144)
0.023
0.000
0.000
(0.005)***
-0.012
(0.011)***
-0.030
(0.267)
-0.316
(0.028)
0.017
(0.138)*
0.232
(0.025)*
-0.042
(0.081)***
-0.233
(0.068)***
-0.187
(0.4)
-0.508
Observations
Countries
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
(2.472)
-0.059
(0.37)
0.367
(1.897)**
-4.098
(0.335)***
1.241
(0.923)
0.464
(0.919)
0.026
(6.686)
9.811
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Fin. integ. 2 w US
Fin. integ. 1 w US
Fin. integ. 2 w ROW
Fin. integ. 1 w ROW
Equity return correl.
Table 9: Determinants of distribution of US dollar shocks financial integration
54
ECB
November 2007
-0.052
(0.352)
-0.433
(0.244)*
(0.05)
(0.021)
(0.475)
-0.046
(0.102)***
0.001
0.510
(0.046)***
(0.019)***
0.332
-0.154
(0.125)
-0.102
-0.106
-0.273
(0.122)
(0.067)***
-0.043
-0.091
(0.912)
(0.050)*
-1.333
-1.402
(0.299)***
(0.019)
69188
42
-0.015
-0.030
(0.082)
(0.043)
(0.009)***
0.063
(0.264)
0.003
-0.146
(0.103)
0.000
(0.000)**
-0.011
0.001
(0.007)
(0.004)***
0.000
-0.002
(0.017)
-0.011
-0.028
-0.035
(0.009)***
(1.290)***
-3.441
(2.119)
2.896
(1.790)***
-3.929
(0.009)**
0.022
(0.172)
-0.039
(0.409)***
-3.375
(9.746)
-12.615
(3.031)***
-6.958
(35.784)**
71.859
(0.990)***
-13.923
(3.083)**
-7.666
(2.745)
-2.123
(15.691)***
69188
42
(0.009)***
-0.054
(0.041)
0.005
(0.099)
-0.052
(0.000)***
0.000
(0.004)***
-0.013
(0.009)***
-0.038
(0.22)
-0.298
(0.02)
-0.018
(0.102)***
0.594
(0.019)***
-0.142
(0.066)***
-0.305
(0.049)***
-0.148
(0.316)***
-42.240
-28.738
(0.94)
-1.102
(4.171)
2.185
(12.996)
-5.179
(0.018)*
0.035
(0.354)
0.135
(0.042)**
-0.088
(17.616)
-7.476
(2.43)
0.151
(0.467)***
1.508
(3.121)***
-8.067
(6.166)
-5.811
(5.804)
-0.777
(12.361)***
69188
42
(0.009)***
-0.066
(0.042)
0.025
(0.107)
-0.058
(0.000)**
0.000
(0.004)***
-0.015
(0.009)***
-0.059
(0.216)**
-0.432
(0.021)
-0.027
(0.110)***
0.723
(0.020)***
-0.175
(0.067)***
-0.369
(0.052)***
-0.167
(0.340)***
-2.133
-1.803
Debt securities
Equity securities
-2.650
(0.03)
0.006
(0.131)
0.181
(0.421)
-0.489
(0.011)
0.002
(0.012)
-0.002
(0.328)
-0.080
(0.548)
-0.013
(0.083)
-0.088
(13.043)
-1.237
(0.370)
-0.382
(0.198)
-0.095
(0.191)
0.135
(1.411)*
69188
42
(0.008)***
-0.060
(0.037)
0.016
(0.09)
-0.044
(0.000)***
0.000
(0.003)***
-0.014
(0.008)***
-0.045
(0.200)**
-0.475
(0.018)
-0.019
(0.091)***
0.626
(0.017)***
-0.149
(0.059)***
-0.396
(0.044)***
-0.183
(0.268)***
-2.124
Loans
Observations
Countries
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
FDI
Table 10: Determinants of distribution of US dollar shocks composition of financial integration
ECB
November 2007
55
-0.667
(0.894)
(0.471)
(0.083)
-0.218
-0.056
0.011
(0.408)**
(0.228)
(0.047)
0.998
(0.076)***
(0.041)
-0.025
-0.265
(0.258)***
(0.138)
-0.025
-0.671
-0.039
-0.367
(0.202)*
0.045
(0.645)
(0.114)
-3.289
(1.189)***
-0.333
76761
42
-0.121
(0.034)***
0.013
(0.166)
(0.092)
(0.019)
0.094
(0.417)
-0.021
-0.181
0.050
(0.001)
0.000
(0.238)
0.000
(0.014)
(0.008)
0.000
-0.016
-0.005
-0.105
(0.034)***
0.002
(0.018)
-0.039
(0.023)
-0.006
(0.098)
0.049
(0.336)
-0.219
0.000
0.001
(0.009)
0.002
(0.021)
-0.008
(0.373)
0.007
(0.064)
-0.036
(0.39)
0.303
(0.057)
-0.077
(0.15)
0.015
(0.157)
-0.021
81260
45
(0.015)**
-0.030
(0.073)
0.003
(0.184)
0.030
(0.000)*
0.000
(0.006)**
-0.012
(0.015)***
0.237
(1.124)
-2.054
4.638
(0.049)
0.039
(0.213)
-0.013
(0.653)
-0.177
(0.001)
0.000
(0.018)
0.015
(0.044)
0.062
(0.944)
0.436
(0.111)
0.005
(0.588)*
-1.017
(0.114)
0.164
(0.332)
0.346
(0.305)
0.132
(1.947)**
75429
43
(0.017)**
-0.037
(0.081)
0.025
(0.202)
-0.020
0.000
0.000
(0.007)**
-0.014
(0.016)***
-0.052
(0.439)
-0.556
(0.04)
-0.007
(0.199)**
0.512
(0.037)***
-0.151
(0.125)***
-0.366
(0.098)
-0.113
(0.579)***
-1.776
51.972
(0.835)
0.285
(3.913)
-1.429
(10.862)
-7.315
(0.015)
0.009
(0.322)
0.346
(0.770)**
1.715
(18.316)
20.340
(2.077)
-0.722
(10.48)
-3.445
(1.843)
0.903
(5.823)
3.329
(5.103)
0.361
(30.153)*
75429
43
(0.016)**
-0.033
(0.076)
0.028
(0.193)
-0.015
0.000
0.000
(0.006)**
-0.013
(0.015)***
-0.050
(0.397)
-0.554
(0.038)
-0.003
(0.189)**
0.425
(0.035)***
-0.136
(0.116)***
-0.327
(0.093)
-0.098
(0.547)***
-6.484
(0.077)*
-0.129
(0.344)
0.355
(1.086)
-1.296
(0.001)**
0.003
(0.03)
-0.013
(0.072)**
-0.144
(1.333)
0.158
(0.22)
-0.279
(1.194)***
3.547
(0.190)
-0.080
(0.52)
-0.496
(0.512)
-0.462
(3.674)*
81260
45
(0.018)
-0.013
(0.087)
-0.035
(0.219)
0.128
(0.000)**
-0.001
(0.007)
-0.009
(0.018)
-0.019
(0.467)
-0.464
(0.044)
0.028
(0.219)
0.033
(0.04)
-0.026
(0.134)
-0.217
(0.107)
-0.037
(0.628)
-0.871
Observations
Countries
5. Net exports
Trade balance
PPI
CPI
4. Prices
Housing starts
Consumer confidence
NAPM / ISM
(0.391)
-0.450
(0.036)
0.004
(0.182)*
0.335
(0.034)***
-0.106
(0.112)***
-0.304
(0.089)
-0.093
(0.521)***
-1.614
Workweek
Retail sales
Unemployment
GDP
2. Real activity
Monetary policy
1. Monetary policy
Trade integ. 2 w US
Trade integ. 1 w US
Trade integ. 2 w ROW
Trade integ. 1 w ROW
GDP correl. w US
Table 11: Determinants of distribution of US dollar shocks real integration
European Central Bank Working Paper Series

For a complete list of Working Papers published by the ECB, please visit the ECBs website
(http://www.ecb.europa.eu).
790 Asset prices, exchange rates and the current account by M. Fratzscher, L. Juvenal and L. Sarno, August 2007.
791 Inquiries on dynamics of transition economy convergence in a two-country model by J. Brha and
J. Podpiera, August 2007.
792 Euro area market reactions to the monetary developments press release by J. Coffinet and S. Gouteron,
August 2007.
793 Structural econometric approach to bidding in the main refinancing operations of the Eurosystem
by N. Cassola, C. Ewerhart and C. Morana, August 2007.
794 (Un)naturally low? Sequential Monte Carlo tracking of the US natural interest rate by M. J. Lombardi and
S. Sgherri, August 2007.
795 Assessing the impact of a change in the composition of public spending: a DSGE approach by R. Straub and
I. Tchakarov, August 2007.
796 The impact of exchange rate shocks on sectoral activity and prices in the euro area by E. Hahn, August 2007.
797 Joint estimation of the natural rate of interest, the natural rate of unemployment, expected inflation, and
potential output by L. Benati and G. Vitale, August 2007.
798 The transmission of US cyclical developments to the rest of the world by S. Des and I. Vansteenkiste,
August 2007.
799 Monetary policy shocks in a two-sector open economy: an empirical study by R. Llaudes, August 2007.
800 Is the corporate bond market forward looking? by J. Hilscher, August 2007.
801 Uncovered interest parity at distant horizons: evidence on emerging economies & nonlinearities by A. Mehl
and L. Cappiello, August 2007.
802 Investigating time-variation in the marginal predictive power of the yield spread by L. Benati and
C. Goodhart, August 2007.
803 Optimal monetary policy in an estimated DSGE for the euro area by S. Adjemian, M. Darracq Paris and
S. Moyen, August 2007.
804 Growth accounting for the euro area: a structural approach by T. Proietti and A. Musso, August 2007.
805 The pricing of risk in European credit and corporate bond markets by A. Berndt and I. Obreja, August 2007.
806 State-dependency and firm-level optimization: a contribution to Calvo price staggering by P. McAdam and
A. Willman, August 2007.
807 Cross-border lending contagion in multinational banks by A. Derviz and J. Podpiera, September 2007.
808 Model misspecification, the equilibrium natural interest rate and the equity premium by O. Tristani,
September 2007.
56
ECB
November 2007
809 Is the New Keynesian Phillips curve flat? by K. Kuester, G. J. Mller und S. Stlting, September 2007.
810 Inflation persistence: euro area and new EU Member States by M. Franta, B. Saxa and K. mdkov,
September 2007.
811 Instability and nonlinearity in the euro area Phillips curve by A. Musso, L. Stracca and D. van Dijk,
September 2007.
812 The uncovered return parity condition by L. Cappiello and R. A. De Santis, September 2007.
813 The role of the exchange rate for adjustment in boom and bust episodes by R. Martin, L. Schuknecht and
I. Vansteenkiste, September 2007.
814 Choice of currency in bond issuance and the international role of currencies by N. Siegfried, E. Simeonova
and C. Vespro, September 2007.
815 Do international portfolio investors follow firms foreign investment decisions? by R. A. De Santis and
P. Ehling, September 2007.
816 The role of credit aggregates and asset prices in the transmission mechanism: a comparison between the euro
area and the US by S. Kaufmann and M. T. Valderrama, September 2007.
817 Convergence and anchoring of yield curves in the euro area by M. Ehrmann, M. Fratzscher, R. S. Grkaynak
and E. T. Swanson, October 2007.
818 Is time ripe for price level path stability? by V. Gaspar, F. Smets and D. Vestin, October 2007.
819 Proximity and linkages among coalition participants: a new voting power measure applied to the International
Monetary Fund by J. Reynaud, C. Thimann and L. Gatarek, October 2007.
820 What do we really know about fiscal sustainability in the EU? A panel data diagnostic by A. Afonso and
C. Rault, October 2007.
821 Social value of public information: testing the limits to transparency by M. Ehrmann and M. Fratzscher,
October 2007.
822 Exchange rate pass-through to trade prices: the role of non-linearities and asymmetries by M. Bussire,
October 2007.
823 Modelling Irelands exchange rates: from EMS to EMU by D. Bond and M. J. Harrison and E. J. OBrien,
October 2007.
824 Evolving U.S. monetary policy and the decline of inflation predictability by L. Benati and P. Surico,
October 2007.
825 What can probability forecasts tell us about inflation risks? by J. A. Garca and A. Manzanares,
October 2007.
826 Risk sharing, finance and institutions in international portfolios by M. Fratzscher and J. Imbs, October 2007.
827 How is real convergence driving nominal convergence in the new EU Member States?
by S. M. Lein-Rupprecht, M. A. Len-Ledesma and C. Nerlich, November 2007.
828 Potential output growth in several industrialised countries: a comparison by C. Cahn and A. Saint-Guilhem,
November 2007.
ECB
November 2007
57
829 Modelling inflation in China: a regional perspective by A Mehrotra, T. Peltonen and A. Santos Rivera,
November 2007.
830 The term structure of euro area break-even inflation rates: the impact of seasonality by J. Ejsing, J. A. Garca
and T. Werner, November 2007.
831 Hierarchical Markov normal mixture models with applications to financial asset returns by J. Geweke and
G. Amisano, November 2007.
832 The yield curve and macroeconomic dynamics by P. Hrdahl, O. Tristani and D. Vestin, November 2007.
833 Explaining and forecasting euro area exports: which competitiveness indicator performs best?
by M. Ca Zorzi and B. Schnatz, November 2007.
834 International frictions and optimal monetary policy cooperation: analytical solutions by M. Darracq Paris,
November 2007.
835 US shocks and global exchange rate configurations by M. Fratzscher, November 2007.
58
ECB
November 2007
Date: 15 Nov, 2007 14:39:49;Format: (420.00 x 297.00 mm);Output Profile: SPOT IC300;Preflight: Failed!

US Shocks and Global Exchange Rate Configurations

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US Shocks and Global Exchange Rate Configurations

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WO R K I N G PA P E R S E R I E S

US SHOCKS AND GLOBAL

In 2007 all ECB

This paper can be downloaded without charge from

European Central Bank, 2007

3 Global distribution of US shocks

4 Evolution over time in heterogeneity

5 Channels and determinants

Appendix: Variable definitions and sources

Tables and figures

European Central Bank Working Paper Series

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