ABSTRACT
The aim of this paper is to analyze the dynamics of the exchange rate (E) in the face of expansionary policies undertaken to cope with external shocks over the period 2000: 01-2020: 03. Our results, based on an ARDL model and impulse-response functions, confirm evidence of overshooting of E in South Korea, Mexico, the United Kingdom and the United States, while in Germany, Brazil and Japan no such evidence was found;perhaps this is due to the semi-fixed nature of the euro, the reprimarization of the Brazilian trade structure and Japan's stagnation cum deflation. Our original contribution and main conclusion is that expansionary policies undertaken to tame the effects of both the 2007/08 financial crisis and the Covid-19 pandemic act upon the dynamics of E, in turn implying significant effects on: foreign debt, institutional sectors' balance sheets, balance of payments and economic growth. Hence governments should adopt countervailing measures, it is highly recommended. Lack of sufficient data to estimate the impact of E overshooting, triggered by the Covid-19, on the latter variables is the main shortcoming of the paper. © 2021 The Author(s).