Hélène Rey on cracking the code to the global financial cycle
The dollar and financial cycle move together. For the first time, economists think they know why
One of the best understood facts in international economics is that the dollar is at the centre of everything. Critical to trade and finance, the US currency affects every other economy and the Federal Reserve’s policy is transmitted worldwide via exchange rates. There is a well-documented link between the strength of the dollar and financial conditions worldwide – the global financial cycle. In the upward phase of the cycle, risky assets appreciate and credit conditions ease, while the dollar
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