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The Effects of International F/X Markets on Domestic Currencies Using Wavelet Networks: Evidence from Emerging Markets


  • Cifter, Atilla
  • Ozun, Alper


This 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.

Suggested Citation

  • Cifter, Atilla & Ozun, Alper, 2007. "The Effects of International F/X Markets on Domestic Currencies Using Wavelet Networks: Evidence from Emerging Markets," MPRA Paper 2482, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2482

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    References listed on IDEAS

    1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    2. Muller, Ulrich A. & Dacorogna, Michel M. & Dave, Rakhal D. & Olsen, Richard B. & Pictet, Olivier V. & von Weizsacker, Jacob E., 1997. "Volatilities of different time resolutions -- Analyzing the dynamics of market components," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 213-239, June.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. J-F. Muzy & D. Sornette & J. delour & A. Arneodo, 2001. "Multifractal returns and hierarchical portfolio theory," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 131-148.
    5. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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    Cited by:

    1. Cifter Atilla & Ozun Alper, 2008. "Estimating the Effects of Interest Rates on Share Prices in Turkey Using a Multi-Scale Causality Test," Review of Middle East Economics and Finance, De Gruyter, vol. 4(2), pages 68-79, April.
    2. Tiwari, Aviral Kumar, 2012. "Decomposing Time-Frequency Relationship between Interest Rates and Share Prices in India through Wavelets," MPRA Paper 39693, University Library of Munich, Germany.

    More about this item


    F/X Markets; Emerging markets; Wavelet networks; Wavelets; Neural networks;

    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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