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Currency relationships over time: a network analysis and case study of Mexico

In: Foreign Exchange Constraint and Developing Economies

Author

Listed:
  • Bush Georgia
  • Serafin Martínez-Jaramillo
  • Escobar-Farfán Luis O. L.
  • Flores-Tamés Erwin

Abstract

In this chapter, we construct dynamic currency networks using exchange rate correlations for 66 currencies for the period 1995-2018 to study currency centrality. First, we contrast the results from the minimum spanning tree (MST) and planar maximally filtered graph (PMFG) filtering techniques and argue that the MST is not sufficient to study centrality. Next, after filtering out the most irrelevant correlations, we use our foreign exchange network to 1) compare pre-, during and post-global financial crisis currency relationships; and 2) document and analyse currency centrality for developing economy currencies, with a case study on the Mexican peso. The chapter's targeted contributions are twofold: 1) methodological improvements on foreign exchange network construction, and 2) analysis of the dynamics of currency centrality for emerging and frontier economies.

Suggested Citation

  • Bush Georgia & Serafin Martínez-Jaramillo & Escobar-Farfán Luis O. L. & Flores-Tamés Erwin, 2023. "Currency relationships over time: a network analysis and case study of Mexico," Chapters, in: Aleksandr V. Gevorkyan (ed.), Foreign Exchange Constraint and Developing Economies, chapter 5, pages 100-123, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20432_5
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