Information Transmission and Spillover in Currency Markets: A Generalized Variance Decomposition Analysis

The Quarterly Review of Economics and Finance 47 (2007) 312–330

Fox School of Business Research Paper

19 Pages Posted: 16 Jun 2014

See all articles by Elyas Elyasiani

Elyas Elyasiani

Temple University - Department of Finance

Ahmet Kocagil

Fitch Ratings Inc.

Iqbal Mansur

Widener University - School of Business Administration

Date Written: November 3, 2004

Abstract

This paper investigates the dynamics in the British Pound (BP), Deutsche Mark (DM), Swiss Franc (SF), and Japanese Yen (JY) futures using Generalized Variance Decomposition analysis over the 1985–2005 period. The results support the interdependence hypothesis against the segregation model with the degree of susceptibility to foreign shocks varying across currencies; internal forces are more dominant for BP and JY, whereas DM and SF are more exposed to external shocks. The results also reveal that SF was tightly linked to the DM before the demise of the latter, whereas it became aligned with the BP afterwards. The inter-currency effects lessened in the post-1987 crash period and then reversed course in the beginning of the new century.

Keywords: Intraday, Currency futures, Generalized variance decomposition

JEL Classification: C3, F3, G1

Suggested Citation

Elyasiani, Elyas and Kocagil, Ahmet and Mansur, Iqbal, Information Transmission and Spillover in Currency Markets: A Generalized Variance Decomposition Analysis (November 3, 2004). The Quarterly Review of Economics and Finance 47 (2007) 312–330; Fox School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=2451148

Elyas Elyasiani (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Ahmet Kocagil

Fitch Ratings Inc. ( email )

One state street plaza
New York, NY 10004
United States

Iqbal Mansur

Widener University - School of Business Administration ( email )

3800 Vartan Way
PO Box 69381
Harrisburg, PA 17106-9381
United States

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