Economics, Econometrics and Finance
4 years ago

Imbalances in bond markets reshape global monetary policy and boost economies.

Theoretical Economics Letters
Exchange Rates, Macroeconomic Fundamentals and Risk Aversion
Ricardo Laborda, José Olmo

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The exchange rate is influenced by differences in risk between short- and long-term bonds in international markets. These differences can lead to unexpected effects on monetary policy in open economies. Imbalances in risk premiums between countries can be used by monetary authorities to adjust policy and boost economic output.