Safe haven effects caused exchange rate swings: IMF paper
An IMF paper, published on Thursday, says safe haven effects rather than carry trade effects were the main drivers of exchange rate swings experienced during the financial crisis.
Thomas Dowling and Nicoletta Batini, the paper's authors, use a Nelson-Siegel model to measure the drivers of exchange rate swings experienced from 2008 to 2010.
Dowling and Batini find the exchange rate volatility experienced during this period was largely dominated by safe haven effects, rather than carry trade
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