Exchange Rate Synchronization for a Set of Currencies from Different Monetary Areas

Author:

Portugal Duarte Antonio,Da Silva Nuno Baetas

Abstract

The degree of co-movement between currencies remains an important subject for international trade and monetary integration across countries. However, the economic literature has given limited answers about the directional relationships among currencies, and whether they have a leader or a driver. Using the Hodrick-Prescott filter and the wavelet methodology, this paper analyzes exchange rate synchronization for a set of twelve currencies belonging to different monetary areas covering the period between January 1980 and July 2020. The empirical results reveal that: i) the U.S. dollar still plays an essential role as a foreign exchange anchor; ii) the euro shows an out-of-phase relationship with the vast majority of currencies, including with the other European currencies; iii) the British pound seems to have departed significantly from the European single currency; iv) the Brazilian real leads the Chinese yuan for most of the sample, and both currencies record great dissimilarities with the other currencies; v) in the absence of short-term foreign exchange market frictions, average bilateral distances between currencies are smaller, and vi) during the international financial crisis, exchange rates became more synchronized.

Publisher

Editura Universitatii Alexandru Ioan Cuza din Iasi

Subject

General Economics, Econometrics and Finance,General Business, Management and Accounting

Cited by 1 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Does the regional proximity lead to exchange rate spillover?;Journal of International Financial Markets, Institutions and Money;2022-11

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