The US Dollar-Euro Exchange Rate and US-EMU Bond Yield Differentials: A Causality Analysis
15 Pages Posted: 21 Apr 2011
Date Written: 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.
Keywords: Causality, Exchange rate, Long-term interest rates, Rolling regression
JEL Classification: C32, F31, F33, G15
Suggested Citation: Suggested Citation