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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Episode guests

Charles Engel

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Episode notes

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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.

Intro

2min

Navigating the Economics Landscape

9min

The US Dollar: A Safe Haven Paradox

4min

Currency Models and Monetary Policy Insights

19min

Navigating the Transition: Career Advice and AI Implications for Students

4min

Exploring the Intersection of Literature and Economics

2min

Charles Engel is Donald Hester Professor of Economics at the University of Wisconsin. He is also a Research Associate at the National Bureau of Economic Research and a Research Fellow at the Centre for Economic Policy Research. He has been a consultant to the Dallas and Chicago branches of the U.S. Federal Reserve, the European Central Bank, and the Bank of England. In this podcast we discuss the standard model to explain FX movements, how to forecast FX, and the importance of safe-haven and liquidity demand for the dollar.

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