Arbeitspapier
On causal relationships between exchange rates and fundamentals: Better than you think
This note revisits the temporal causality between exchange rates and fundamentals put forward by Engel and West (2005). We analyze the causal link within multivariate VARs by making use of the concept of multi-step causality. Our results show that, considering information content beyond one-period ahead, the causal link between exchange rates and fundamentals is stronger than previously reported. We find Granger-causality running from exchange rates to fundamentals at some horizon in 49% of our tests and running from fundamentals to exchange rates in 59% of them.
- Language
-
Englisch
- Bibliographic citation
-
Series: Department of Economics Discussion Paper ; No. 09,09
- Classification
-
Wirtschaft
Foreign Exchange
International Finance Forecasting and Simulation: Models and Applications
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- Subject
-
Granger-causality
multi-step
exchange rates
fundamentals
Wechselkurs
Makroökonomik
VAR-Modell
Kausalanalyse
Industriestaaten
- Event
-
Geistige Schöpfung
- (who)
-
Christopoulos, Dimitris
León-Ledesma, Miguel A.
- Event
-
Veröffentlichung
- (who)
-
University of Kent, Department of Economics
- (where)
-
Canterbury
- (when)
-
2009
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Christopoulos, Dimitris
- León-Ledesma, Miguel A.
- University of Kent, Department of Economics
Time of origin
- 2009
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