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Quantifying Informational Linkages in a Global Model of Currency Spot Markets

Matthew Greenwood-Nimmo, Viet Hoang Nguyen () and Yongcheol Shin
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Matthew Greenwood-Nimmo: Department of Economics, The University of Melbourne

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We develop a global vector autoregressive model to study the transmission of information between currency spot markets. Our model accounts for both simultaneous and dynamic interactions between exchange rates and order flows using historical data from the Reuters Dealing 2000–1 platform for the period May–August 1996. By analysing the network topography of the system, we find that currency markets are intricately linked and that the Deutsche Mark and the Yen exert a leading influence over the European currencies. Furthermore, using a novel technique we find that the Yen and Sterling act as safe haven currencies.

Keywords: Exchange rates; order flows; global VAR; connectedness and spillovers; safe haven currency (search for similar items in EconPapers)
JEL-codes: C32 C51 F31 G15 (search for similar items in EconPapers)
Pages: 34pp
Date: 2014-07
New Economics Papers: this item is included in nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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