Multifrequency network for SADC exchange rate markets using EEMD-based DCCA

Anokye M. Adam (), Kwabena Kyei, Simiso Moyo, Ryan Gill and Emmanuel N. Gyamfi
Additional contact information
Anokye M. Adam: University of Venda
Kwabena Kyei: University of Venda
Simiso Moyo: University of Venda
Ryan Gill: University of Louisville
Emmanuel N. Gyamfi: Ghana Institute of Management and Public Administration

Journal of Economics and Finance, 2022, vol. 46, issue 1, No 6, 145-166

Abstract: Abstract We used the detrended cross-correlation analysis (DCCA) method based on ensemble empirical mode decomposition (EEMD) to study the dynamic interdependence structure of daily domestic currency to US dollar exchange rates of 15 Southern African Development Community (SADC) exchange rate markets. We first decompose all series into intrinsic mode functions using EEMD and reconstruct the series into three frequency modes: high-, medium- and low frequency, and residue. The DCCA method was used to analyze the cross-correlation between the various frequencies, residues and original series. These were meant to address the nonlinearity and nonstationarity in observed exchange rate data. Finally, we formed a correlation network from the cross-correlation coefficients in all cases which revealed rich than would have been obtained from the original series. We observed similarities between the nature of cross-correlation between high-frequency series mimic the original series and the significant cross-correlation among the long-term trend of most SADC countries exchange rate markets. The innovation of this paper is to combine EEMD with DCCA to study the multifrequency cross-correlations of exchange rate markets, which can provide policymakers a deeper understanding of the dynamics of exchange rate markets toward the formation of currency unions.

Keywords: Detrended cross-correlation analysis (DCCA); Ensemble empirical mode decomposition (EEMD); Intrinsic mode function; Exchange rate; Short data span; Nonstationarity; Nonlinearity; Long memory; Time series (search for similar items in EconPapers)
JEL-codes: C30 C40 C50 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s12197-021-09560-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:46:y:2022:i:1:d:10.1007_s12197-021-09560-w

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-021-09560-w

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().