In this seminar Robin Brooks and Silvia Ardagna will provide an overview of their recent paper written with Michael Cahill, Real-Time Macro Foreign Exchange Rates.

There are plenty of reasons to think that strong growth goes hand-in-hand with a strong exchange rate. But in practice, foreign exchange markets offer conflicting evidence. At the height of the Euro zone crisis – clearly a negative growth shock – the Euro stayed near all-time highs in trade-weighted terms. And though US growth since the global financial crisis has far surpassed Europe or Japan, the Dollar – with the exception of 2014 and 2015 when the ECB and BoJ were shifting aggressively towards QE – has failed to appreciate. This presentation examines the link between foreign exchange rates and growth. It makes several contributions. On the macro side, it builds a G10 database for first-print GDP and subsequent revisions. This is important because the data we see today are not what markets traded on at the time. On the markets side, we align exchange rates with the timeframe corresponding to the underlying macro data. In the case of Q1 GDP, for example, we look at the average exchange rate between February and April, i.e. when the Q1 data flow and GDP tracking are in process. Making these changes reveals a positive link between economic growth and exchange rates for most of the G10, including for the US Dollar. The authors then examine whether macro data help predict moves in foreign exchange rates, building on a large academic literature. They find that macro data help predict foreign exchange rate movements, in some cases outperforming the random walk hypothesis.

Robin is the chief currency economist. He joined Goldman Sachs in 2010 as a vice president on the Foreign Exchange (FX) strategy team and was named managing director in 2011. Prior to joining the firm, Robin was the FX strategist at Brevan Howard. Before joining the private sector, he spent eight years as an economist at the International Monetary Fund (IMF) in Washington, DC, where he worked on the IMF’s fair value models for FX, published academic research and participated in missions to IMF program countries. His academic research has been published in the American Economic Review, Brookings Papers on Economic Activity, IMF Staff Papers, Journal of Empirical Finance, Journal of Portfolio Management and Review of Finance. Robin earned a PhD in Economics from Yale University in 1998. His dissertation studied the impact on the stock market and the equity premium as baby boomers retire. He earned a BSc in Monetary Economics.

Silvia is a senior economist and Foreign Exchange (FX) strategist in the Global Macro & Markets Research team. She focuses on the FX markets globally and contributes to the research and strategy of FX markets. Silvia joined Goldman Sachs in 2012 as an executive director in the Global Macro & Markets Fixed Income Research team, previously focusing on the rate markets globally and contributing to the research and strategy of developed rates markets. Silvia was named managing director in 2013. Prior to joining the firm, Silvia worked at Bank of America Merrill Lynch as senior European economist from 2010 to 2011. Before that, she was an associate professor at the Department of Economics of Harvard University from 2004 to 2010 and an assistant professor at Wellesley College from 2000 to 2004. Silvia’s research work covers a variety of issues in macroeconomics, including the effects of fiscal austerity measures on economic activity and interest rates. She has published in leading academic journals and her work on budget consolidations has been cited in several publications, including the Financial Times, The Wall Street Journal and The New York Times. Silvia has been a consultant for the European Central Bank Fiscal Policy Division and a visiting fellow at the International Monetary Fund Fiscal Affairs Division. Silvia earned a BA in Economics and an MA in Economics from Universita’ Bocconi, Milan, in 1994 and 1995, respectively, and a PhD in Economics from Boston College in 2000.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.