Asset Price Co-Movements and the Dollar Carry Trade (Roubini)

The ongoing dollar carry trade has recently come to the forefront of the international policy debate (Roubini, 2009). Capital inflows to emerging market countries have put pressures on some currencies, and authorities have responded by slowing the pace of appreciation, in some cases by capital controls. This short article uses a GARCH framework to examine the co-movement of the U.S. dollar with a number of key financial asset prices in recent years.

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