The US Dollar-Euro Exchange Rate and US-EMU Bond Yield Differentials: A Causality Analysis
Simón Sosvilla Rivero
Complutense University of Madrid
María Del Carmen Ramos-Herrera
Universidad Complutense de Madrid (UCM)
April 15, 2011
This paper test for causality between the US Dollar-Euro exchange rate and US-EMU bond yield differentials. To that end, we apply Hsiao (1981)’s sequential procedure to daily data covering the 1999-2011 period. Our results suggest the existence of statistically significant Granger causality running one-way from bond yield differentials to the exchange rate, but not the other way around.
Number of Pages in PDF File: 15
Keywords: Causality, Exchange rate, Long-term interest rates, Rolling regression
JEL Classification: C32, F31, F33, G15working papers series
Date posted: April 21, 2011
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