The Resource Exchange rates and fundamentals : co-movement, long-run relationships and short-run dynamics, Stelios Bekiros

Exchange rates and fundamentals : co-movement, long-run relationships and short-run dynamics, Stelios Bekiros

Label
Exchange rates and fundamentals : co-movement, long-run relationships and short-run dynamics
Title
Exchange rates and fundamentals
Title remainder
co-movement, long-run relationships and short-run dynamics
Statement of responsibility
Stelios Bekiros
Creator
Contributor
Subject
Language
eng
Summary
The present study builds upon the seminal work of Engel and West [2005, Journal of Political Economy 113, 485-517] and in particular on the relationship between exchange rates and fundamentals. The paper discusses the well-known puzzle that fundamental variables such as money supplies, interest rates, outputs etc. provide help in predicting changes in floating exchange rates. It also tests the theoretical result of Engel and West (2005) that in a rational expectations present-value model, the asset price manifests near-random walk behaviour if the fundamentals are I(1) and the factor for discounting future fundamentals is near one. The study explores the direction and nature of causal interdependencies and cross-correlations among the most widely traded currencies in the world, their country-specific fundamentals and their US-differentials. A new VAR/VECM-GARCH multivariate filtering approach is implemented, whilst linear and nonlinear non-causality is tested on the time series. In addition to pairwise causality testing, several different groupings of variables are explored. The methodology is extensively tested and validated on simulated and empirical data. The implication is that although exchange rates and fundamentals appear to be linked in a way that is broadly consistent with asset-pricing models, there is no indication of a prevailing causal behaviour from fundamentals to exchange rates or vice-versa. When nonlinear effects are accounted for, the evidence implies that the pattern of leads and lags changes over time. These results may influence the greater predictability of currency markets. Overall, fundamentals may be important determinants of FX rates, however there may be some other unobservable variables driving the currency rates that current asset-pricing models have not yet captured
Member of
Cataloging source
IT-FiEUI
http://library.link/vocab/creatorName
Bekiros, Stelios D
Index
no index present
Literary form
non fiction
http://library.link/vocab/relatedWorkOrContributorName
European University Institute
Series statement
  • EUI working papers. ECO
  • EUI papers
Series volume
2011/21
http://library.link/vocab/subjectName
  • Foreign exchange rates
  • Random walks (Mathematics)
Label
Exchange rates and fundamentals : co-movement, long-run relationships and short-run dynamics, Stelios Bekiros
Link
http://hdl.handle.net/1814/17580
Instantiates
Publication
Note
Keywords: simulation-based inference; causality; random walk; filtering; nonlinearity; asset-pricing; F31; F37; C52; C53
Bibliography note
Includes bibliographical references (pages 19-20)
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb17060011
Dimensions
30 cm.
Extent
44 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
System control number
(OCoLC)871271477
Label
Exchange rates and fundamentals : co-movement, long-run relationships and short-run dynamics, Stelios Bekiros
Link
http://hdl.handle.net/1814/17580
Publication
Note
Keywords: simulation-based inference; causality; random walk; filtering; nonlinearity; asset-pricing; F31; F37; C52; C53
Bibliography note
Includes bibliographical references (pages 19-20)
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb17060011
Dimensions
30 cm.
Extent
44 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
System control number
(OCoLC)871271477

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