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Currency relationships over time: a network analysis and case study of Mexico

Georgia Bush, Serafin Martínez-Jaramillo, Escobar-Farfán Luis O. L. and Flores-Tamés Erwin

Chapter 5 in Foreign Exchange Constraint and Developing Economies, 2023, pp 100-123 from Edward Elgar Publishing

Abstract: In this chapter, we construct dynamic currency networks using exchange rate correlations for 66 currencies for the period 1995-2018 to study currency centrality. First, we contrast the results from the minimum spanning tree (MST) and planar maximally filtered graph (PMFG) filtering techniques and argue that the MST is not sufficient to study centrality. Next, after filtering out the most irrelevant correlations, we use our foreign exchange network to 1) compare pre-, during and post-global financial crisis currency relationships; and 2) document and analyse currency centrality for developing economy currencies, with a case study on the Mexican peso. The chapter's targeted contributions are twofold: 1) methodological improvements on foreign exchange network construction, and 2) analysis of the dynamics of currency centrality for emerging and frontier economies.

Keywords: Development Studies; Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2023
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