This chapter surveys recent theoretical and empirical contributions on foreign exchange rate
determination. The chapter first examines monetary models under uncovered interest parity …

Financial markets have become increasingly global in recent decades, yet the pricing of
internationally traded assets continues to depend strongly upon local risk factors, leading to …

We study a business cycle model of the international monetary system featuring a time-
varying demand for safe dollar bonds, greater risk-bearing capacity in the United States than …

We establish currency as an important factor shaping global portfolios. Using a new security-
level data set, we demonstrate that investor holdings are biased toward their own currencies …

We provide a theory of the determination of exchange rates based on capital flows in
imperfect financial markets. Capital flows drive exchange rates by altering the balance …

We propose a dynamic general equilibrium model of exchange rate determination that
accounts for all major exchange rate puzzles, including Meese-Rogoff, Backus-Smith …

This paper investigates exchange rate pass-through into consumer prices by considering
the nature of the shock triggering currency movements. By individually estimating structural …

We identify a “slope” factor in exchange rates. High interest rate currencies load more on this
slope factor than low interest rate currencies. This factor accounts for most of the cross …

Sorting countries by their dollar currency betas produces a novel cross section of average
currency excess returns. A slope factor (long in high beta currencies and short in low beta …

We show that bond risk premia rise with uncertainty about expected inflation and fall with
uncertainty about expected growth; the magnitude of return predictability using these …