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Dynamic Cross-Correlations Analysis on Economic Policy Uncertainty and US Dollar Exchange Rate: AMF-DCCA Perspective

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  • Ruwei Zhao
  • Yian Cui
  • Giancarlo Consolo

Abstract

In this paper, we employ the multifractal detrended cross-correlation analysis (MF-DCCA) as the measurement instrument for the dynamic cross-correlation inspection between US economic policy uncertainty (EPU) index and US dollar exchange rate return (Ret). By calculating the cross-correlation statistics, we find mild acceptance of cross-correlation between EPU and Ret qualitatively. With further application of MF-DCCA methodology, we find strong power law cross-correlation existence within all scaling orders. Also, apparent persistence of cross-correlation has been discovered with significant Hurst exponents of all orders. Besides, we find that long-term cross-correlation demonstrates more persistence and higher degree of multifractality than those in the short term. Finally, we utilize the rolling window and binominal measurement analysis as revisits of the model. The results are consistent with model statements.

Suggested Citation

  • Ruwei Zhao & Yian Cui & Giancarlo Consolo, 2021. "Dynamic Cross-Correlations Analysis on Economic Policy Uncertainty and US Dollar Exchange Rate: AMF-DCCA Perspective," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-9, January.
    • Handle: RePEc:hin:jnddns:6668912
    DOI: 10.1155/2021/6668912
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    Cited by:

    1. Haider Ali & Faheem Aslam & Paulo Ferreira, 2021. "Modeling Dynamic Multifractal Efficiency of US Electricity Market," Energies, MDPI, vol. 14(19), pages 1-16, September.
    2. Raza, Syed Ali & Masood, Amna & Benkraiem, Ramzi & Urom, Christian, 2023. "Forecasting the volatility of precious metals prices with global economic policy uncertainty in pre and during the COVID-19 period: Novel evidence from the GARCH-MIDAS approach," Energy Economics, Elsevier, vol. 120(C).
    3. Aslam, Faheem & Zil-e-huma, & Bibi, Rashida & Ferreira, Paulo, 2022. "Cross-correlations between economic policy uncertainty and precious and industrial metals: A multifractal cross-correlation analysis," Resources Policy, Elsevier, vol. 75(C).

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