Informational linkages among the major currencies in the EBS market: Evidence from the spot rates of the Euro, Yen and Swiss franc

Yoshihiro Kitamura

doi:10.1016/j.japwor.2011.12.003

Informational linkages among the major currencies in the EBS market: Evidence from the spot rates of the Euro, Yen and Swiss franc

Yoshihiro Kitamura^*

^*Corresponding author for this work

School of Social Sciences

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance.

Original language	English
Pages (from-to)	17-26
Number of pages	10
Journal	Japan and The World Economy
Volume	24
Issue number	1
DOIs	https://doi.org/10.1016/j.japwor.2011.12.003
Publication status	Published - 2012 Jan

Keywords

Foreign exchange rate
High-frequency data
Information sharing

ASJC Scopus subject areas

Finance
Economics and Econometrics
Political Science and International Relations

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10.1016/j.japwor.2011.12.003

Cite this

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title = "Informational linkages among the major currencies in the EBS market: Evidence from the spot rates of the Euro, Yen and Swiss franc",

abstract = "Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance.",

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note = "Funding Information: I would like to thank the anonymous associate editor and reviewer of this paper for their constructive comments and invaluable suggestions. This work was financially supported by JSPS Grants in aid to Young Scientists ( B21730251 ), the Hokugin Foundation and the Nihon Housei Gakkai Foundation .",

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N2 - Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance.

AB - Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance.

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Informational linkages among the major currencies in the EBS market: Evidence from the spot rates of the Euro, Yen and Swiss franc

Abstract

Keywords

ASJC Scopus subject areas

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