The Effects of International F/X Markets on Domestic Currencies Using Wavelet Networks: Evidence from Emerging Markets
AbstractThis paper proposes a powerful methodology wavelet networks to investigate the effects of international F/X markets on emerging markets currencies. We used EUR/USD parity as input indicator (international F/X markets) and three emerging markets currencies as Brazilian Real, Turkish Lira and Russian Ruble as output indicator (emerging markets currency). We test if the effects of international F/X markets change across different timescale. Using wavelet networks, we showed that the effects of international F/X markets increase with higher timescale. This evidence shows that the causality of international F/X markets on emerging markets should be tested based on 64-128 days effect. We also find that the effects of EUR/USD parity on Turkish Lira is higher on 17-32 days and 65-128 days scales and this evidence shows that Turkish lira is less stable compare to other emerging markets currencies as international F/X markets effects Turkish lira on shorten time scale.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2482.
Date of creation: 01 Mar 2007
Date of revision:
F/X Markets; Emerging markets; Wavelet networks; Wavelets; Neural networks;
Find related papers by JEL classification:
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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