Dynamic connectedness of currencies in G7 countries: A Bayesian time-varying approach

Yang Wan and Shi He

Finance Research Letters, 2021, vol. 41, issue C

Abstract: This paper focuses on the dynamic connectedness of the five currencies used in G7 since 1983 in daily frequency measured by a Bayesian time-varying approach. We find that the total connectedness of the system varies dramatically over time, and the changes are related to economic or financial events. Moreover, the US dollar is always a transmitter, and the British pound and Canadian dollar are always recipients; however, the euro and Japanese yen switch roles during the sample period. The pairwise analysis suggests that the US dollar displays positive spillovers to the other currencies, but the Euro is a powerful competitor.

Keywords: Currency connectedness; Bayesian time-varying approach; Economic crisis; Nominal effective exchange rate; G7 countries (search for similar items in EconPapers)
JEL-codes: C11 F31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320317104

DOI: 10.1016/j.frl.2020.101896

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