TY - JOUR
T1 - Interdependence of foreign exchange markets
T2 - A wavelet coherence analysis
AU - Yang, Lu
AU - Cai, Xiao Jing
AU - Zhang, Huimin
AU - Hamori, Shigeyuki
N1 - Funding Information:
We are grateful to the three anonymous referees who provided many helpful comments and suggestions. This work is financially supported by the KAMPO Foundation .
Publisher Copyright:
© 2016 Elsevier B.V.
Copyright:
Copyright 2016 Elsevier B.V., All rights reserved.
PY - 2016/6/1
Y1 - 2016/6/1
N2 - Based on the wavelet decomposition approach, we study co-movement among foreign exchange markets using the returns of exchange rates (GBP/USD, EUR/USD, and JPY/USD). We focus on the interdependence among returns of exchange rates during the recent global financial crisis and European debt crisis. We use a wavelet analysis because of its ability to decompose signals into high and low frequencies. This approach allows us to study shorter time periods independently of longer time periods. The results reveal strong interdependence between the euro and pound sterling at all frequency bands of scale over the sample period. With regard to the yen-pound pairwise, covariation is localized at high scales. Further, we find that interdependence is more pronounced during crises.
AB - Based on the wavelet decomposition approach, we study co-movement among foreign exchange markets using the returns of exchange rates (GBP/USD, EUR/USD, and JPY/USD). We focus on the interdependence among returns of exchange rates during the recent global financial crisis and European debt crisis. We use a wavelet analysis because of its ability to decompose signals into high and low frequencies. This approach allows us to study shorter time periods independently of longer time periods. The results reveal strong interdependence between the euro and pound sterling at all frequency bands of scale over the sample period. With regard to the yen-pound pairwise, covariation is localized at high scales. Further, we find that interdependence is more pronounced during crises.
KW - Asset price transmission channel
KW - Financial contagion
KW - Foreign exchange market
KW - Interdependence
KW - Wavelet coherence
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U2 - 10.1016/j.econmod.2016.01.022
DO - 10.1016/j.econmod.2016.01.022
M3 - Article
AN - SCOPUS:84958949016
VL - 55
SP - 6
EP - 14
JO - Economic Modelling
JF - Economic Modelling
SN - 0264-9993
ER -