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Network analysis of exchange data: interdependence drives crisis contagion

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  • David Matesanz

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  • Guillermo Ortega

    ()

Abstract

In this paper, we examine linear and nonlinear co-movements that appear in the real exchange rates of a group of 28 developed and developing countries. The matrix of Pearson correlation and Phase Synchronous coefficients have been used in order to construct a topology and hierarchy of countries by using the Minimum Spanning Tree (MST). In addition, the MST cost and global correlation coefficients have been calculated to observe the co-movements’ dynamics throughout the time sample. By comparing Pearson and Phase Synchronous information, a new methodology is emphasized; one that can uncover meaningful information pertaining to the contagion economic issue and, more generally, the debate surrounding interdependence and/or contagion in financial time series. Our results suggest some evidence of contagion in the Asian currency crises; however, this contagion is driven by previous and stable interdependence. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • David Matesanz & Guillermo Ortega, 2014. "Network analysis of exchange data: interdependence drives crisis contagion," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 1835-1851, July.
  • Handle: RePEc:spr:qualqt:v:48:y:2014:i:4:p:1835-1851
    DOI: 10.1007/s11135-013-9855-z
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alexei P Kireyev & Andrei Leonidov, 2016. "A Network Model of Multilaterally Equilibrium Exchange Rates," IMF Working Papers 16/130, International Monetary Fund.
    2. Gautier Marti & Frank Nielsen & Miko{l}aj Bi'nkowski & Philippe Donnat, 2017. "A review of two decades of correlations, hierarchies, networks and clustering in financial markets," Papers 1703.00485, arXiv.org, revised May 2018.
    3. Xu, Helian & Cheng, Long, 2016. "The QAP weighted network analysis method and its application in international services trade," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 448(C), pages 91-101.
    4. repec:bpj:jossai:v:5:y:2017:i:3:p:216-228:n:2 is not listed on IDEAS
    5. repec:kap:compec:v:51:y:2018:i:3:d:10.1007_s10614-016-9627-7 is not listed on IDEAS

    More about this item

    Keywords

    Crises; Exchange Rate; Hierarchical Tree;

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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