Understanding Exchange Rates Dynamics

Peter Martey Addo, Monica Billio and Dominique Guegan ()
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Dominique Guegan: Centre d'Economie de la Sorbonne, https://cv.archives-ouvertes.fr/dominique-guegan

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: With the emergence of the chaos theory and the method of surrogates data, nonlinear approaches employed in analysing time series typically suffer from high computational complexity and lack of straightforward explanation. Therefore, the need for methods capable of characterizing time series in terms of their linear, nonlinear, deterministic and stochastic nature are preferable. In this paper, we provide a signal modality analysis on a variety of exchange rates. The analysis is achieved by using the recently proposed "delay vector variance" (DVV) method, which examines local predictability of a signal in the phase space to detect the presence of determinism and nonlinearity in a time series. Optimal embedding parameters used in the DVV analysis are obtain via differential entropy based method using wavelet-based surrogates. A comprehensive analysis of the feasibility of this approach is provided. The empirical results show that the DVV method can be opted as an alternative way to understanding exchange rates dynamics

Keywords: Nonlinearity analysis; exchange rates; surrogates; Delay vector variance (DVV)method; wavelets (search for similar items in EconPapers)
JEL-codes: C14 C22 C40 F31 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2013-03
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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ftp://mse.univ-paris1.fr/pub/mse/CES2013/13023.pdf (application/pdf)

Related works:
Working Paper: Understanding Exchange Rates Dynamics (2013)
Working Paper: Understanding Exchange Rates Dynamics (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:13023

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