01721cas a2200241 a 4500 AALejournalIMF011723 230101c9999 xx r poo 0 0eng d 5.00 USD 9781463938437 1018-5941 BD-DhAAL BD-DhAAL Evans, Martin. Exchange-Rate Dark Matter / Martin Evans. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (63 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Dark matter accounts for 83 percent of the matter in the universe and plays a central role in cosmology modeling. This paper argues that an analogous form of dark matter plays a similarly important role in international macroeconomics. Exchange-rate dark matter is invisible, but its existence can be inferred from observations on real exchange rates and interest rates. I first show that dark matter is the dominant driver of short- and medium-term changes in real exchange rates for the G-7 countries; accounting for more than 90 percent of the variance at the five-year horizon. I then develop a model in which risk shocks account for dark matter's role as a driver of exchange-rate dynamics and other macro variables. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2012/066 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/066/001.2012.issue-066-en.xml IMF e-Library