Do Terror Attacks Affect the Dollar-Pound Exchange Rate? A Nonparametric Causality-in-Quantiles Analysis
Christian Pierdzioch and
Mark Wohar ()
No 201615, Working Papers from University of Pretoria, Department of Economics
While much significant research has been done to study the effects of terror attacks on stock markets, less is known about the response of exchange rates to terror attacks. We suggest a non-parametric causality-in-quantiles test to study whether (relative) terror attacks affect exchange-rate returns and volatility. Using data on the dollar-pound exchange rate to illustrate the test, we show that terror attacks mainly affect the lower and upper quantiles of the conditional distribution of exchange-rate returns. Terror attacks also affect almost all quantiles of the conditional distribution of exchange-rate volatility, where the significance of the effect is particularly strong for the lower quantiles.
Keywords: Exchange rate; returns; volatility; nonparametric causality-in-quantiles test; terror attacks (search for similar items in EconPapers)
JEL-codes: C22 C53 F31 (search for similar items in EconPapers)
Pages: 14 pages
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201615
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