Macro Hive Conversations With Bilal Hafeez
Ep. 243: Charles Engel on Currency Models, Carry Trades and Capital Flows
Nov 22, 2024
In this insightful discussion, Charles Engel, the Donald Hester Professor of Economics at the University of Wisconsin, delves into currency models and exchange rate dynamics. He explores how the US dollar serves as a paradoxical safe-haven currency, even amid heavy debts. Engel critiques traditional forecasting methods and highlights modern approaches that consider financial variables and real interest rates. His thoughts on carry trades and the implications of central bank policies offer a valuable perspective on international monetary dynamics.
39:12
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Quick takeaways
- Engel highlights that incorporating financial variables like liquidity and safe-haven demand significantly improves understanding of exchange rate movements.
- He emphasizes the critical influence of credible central bank policies on currency valuations, capital flows, and investor behavior in financial markets.
Deep dives
Charles Engel's Academic Journey
Charles Engel reflects on his academic background, initially pursuing various majors before settling on political science and economics. He emphasizes that his path to academia wasn't preordained; rather, it evolved as he recognized his strengths in economics during graduate studies. Engel acknowledges that the perception of academia being a less lucrative career choice has shifted over time, particularly in economics, where the field has gained financial recognition. His thesis, centered on exchange rates and international financial topics, laid the foundation for his ongoing research interests.
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