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Time-varying leads and lags across frequencies using a continuous wavelet transform approach

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  • Funashima, Yoshito

Abstract

A precise understanding of lead–lag structures in economic data is important for many economic agents such as policymakers, traders in financial markets, and producers in goods markets. To identify time-varying lead–lag relationships across various frequencies in economic time series, recent studies have used phase difference on the basis of a continuous wavelet transform. However, the extant literature includes several conflicting interpretations of phase difference. In this study, we extensively discuss wavelet phase difference, determine its most plausible interpretation, and thus attempt to address gaps in the existing literature. Consequently, this study suggests that some lead–lag results of previous works have been driven by incorrect interpretations of wavelet phase difference.

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  • Funashima, Yoshito, 2017. "Time-varying leads and lags across frequencies using a continuous wavelet transform approach," Economic Modelling, Elsevier, vol. 60(C), pages 24-28.
    • Handle: RePEc:eee:ecmode:v:60:y:2017:i:c:p:24-28
    DOI: 10.1016/j.econmod.2016.08.024
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    4. Baodi Sun & Yinru Lei & Lijuan Cui & Wei Li & Xiaoming Kang & Manyin Zhang, 2018. "Addressing the Modelling Precision in Evaluating the Ecosystem Services of Coastal Wetlands," Sustainability, MDPI, vol. 10(4), pages 1-15, April.
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    6. Thomas Conlon & Brian M. Lucey & Gazi Salah Uddin, 2018. "Is gold a hedge against inflation? A wavelet time-scale perspective," Review of Quantitative Finance and Accounting, Springer, vol. 51(2), pages 317-345, August.
    7. Sun, Xiaolei & Chen, Xiuwen & Wang, Jun & Li, Jianping, 2020. "Multi-scale interactions between economic policy uncertainty and oil prices in time-frequency domains," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    8. Angeliki Skoura, 2019. "Detection of Lead-Lag Relationships Using Both Time Domain and Time-Frequency Domain; An Application to Wealth-To-Income Ratio," Economies, MDPI, vol. 7(2), pages 1-27, April.
    9. João Martins, 2022. "Bond Yields Movement Similarities and Synchronization in the G7: A Time–Frequency Analysis," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 18(2), pages 189-214, July.
    10. Mikhail Stolbov & Alexander Karminsky & Maria Shchepeleva, 2018. "Does Economic Policy Uncertainty Lead Systemic Risk? A Comparative Analysis of Selected European Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(3), pages 332-360, September.
    11. Concepción González-Concepción & María Candelaria Gil-Fariña & Celina Pestano-Gabino, 2018. "Wavelet power spectrum and cross-coherency of Spanish economic variables," Empirical Economics, Springer, vol. 55(2), pages 855-882, September.
    12. Kenourgios, Dimitris & Drakonaki, Emmanouela & Dimitriou, Dimitrios, 2019. "ECB’s unconventional monetary policy and cross-financial-market correlation dynamics," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    13. Funashima Yoshito, 2021. "Time–Frequency Regression," Journal of Econometric Methods, De Gruyter, vol. 10(1), pages 21-32, January.
    14. Dimitriou, Dimitrios & Kenourgios, Dimitris & Simos, Theodore, 2020. "Are there any other safe haven assets? Evidence for “exotic” and alternative assets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 614-628.
    15. Franses, Ph.H.B.F. & Wiemann, T., 2018. "Intertemporal Similarity of Economic Time Series," Econometric Institute Research Papers EI2018-30, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.

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    More about this item

    Keywords

    Time-varying leads and lags; Frequencies; Wavelet; Phase difference;
    All these keywords.

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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