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A note on the geographical dispersion of emerging market currencies: The role of outliers

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  • Bauer, Felix
  • Robbert, Juliana

Abstract

The geographical dispersion of currencies is often studied in a cross-sectional convergence regression using data from the BIS triennial survey (see Cheung et al. (2019)). Using three different approaches to outlier detection, we demonstrate that a small number of outliers can have a disproportional impact on the empirical results. These outliers are often identified as large trading centers. For the 2019 to 2022 BIS triennial survey, our findings reveal substantially stronger evidence of convergence to the share of all currencies, once the outliers are excluded from the sample.

Suggested Citation

  • Bauer, Felix & Robbert, Juliana, 2025. "A note on the geographical dispersion of emerging market currencies: The role of outliers," Economics Letters, Elsevier, vol. 253(C).
    • Handle: RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002241
    DOI: 10.1016/j.econlet.2025.112387
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    References listed on IDEAS

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    1. Yin‐Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic Spread of Currency Trading: The Renminbi and Other Emerging Market Currencies," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 25-36, September.
    2. Yin-Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic spread of currency trading: The renminbi and other EM currencies," GRU Working Paper Series GRU_2019_011, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    3. Cheung, Yin-Wong & Grimm, Louisa & Westermann, Frank, 2021. "The evolution of offshore renminbi trading: 2016 to 2019," Journal of International Money and Finance, Elsevier, vol. 113(C).
    4. Guonan Ma & Agustin Villar, 2014. "Internationalisation of emerging market currencies," BIS Papers chapters, in: Bank for International Settlements (ed.), The transmission of unconventional monetary policy to the emerging markets, volume 78, pages 71-86, Bank for International Settlements.
    5. Julian Caballero & Alexis Maurin & Philip Wooldridge & Dora Xia, 2022. "The internationalisation of EME currency trading," BIS Quarterly Review, Bank for International Settlements, December.
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