Exchange Rate Misalignments in Frequency Domain

Axel Grossmann; Alexei G. Orlov

doi:10.1016/j.iref.2012.03.001

Exchange Rate Misalignments in Frequency Domain

Axel Grossmann, Alexei G. Orlov

Finance

Radford University

Research output: Contribution to journal › Article › peer-review

12 Scopus citations

Abstract

This research uses spectral methodology to study how the volatility of spot exchange rate misalignments changed as a result of (1) signing of the Plaza Accord and (2) introduction of the Euro. We study the deviations of Canadian Dollar/US Dollar, Japanese Yen/US Dollar and US Dollar/British Pound spot exchange rates from CPI- and TPI-based equilibrium exchange rates. The spectral density results indicate that the Plaza Accord and the introduction of the Euro helped reduce the volatility of exchange rate misalignments and excess returns for the Yen and the Pound along virtually all frequency components. On the other hand, the Canadian Dollar/US Dollar misalignments are characterized by higher volatility after the adoption of the Plaza Accord.

Original language	American English
Journal	International Review of Economics and Finance
Volume	24
DOIs	https://doi.org/10.1016/j.iref.2012.03.001
State	Published - Oct 2012

Keywords

Equilibrium exchange rates
Euro
Plaza Accord
Spectral analysis

DC Disciplines

Business Administration, Management, and Operations
Finance
Finance and Financial Management
Economics

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10.1016/j.iref.2012.03.001License: Unspecified

Cite this

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title = "Exchange Rate Misalignments in Frequency Domain",

abstract = " This research uses spectral methodology to study how the volatility of spot exchange rate misalignments changed as a result of (1) signing of the Plaza Accord and (2) introduction of the Euro. We study the deviations of Canadian Dollar/US Dollar, Japanese Yen/US Dollar and US Dollar/British Pound spot exchange rates from CPI- and TPI-based equilibrium exchange rates. The spectral density results indicate that the Plaza Accord and the introduction of the Euro helped reduce the volatility of exchange rate misalignments and excess returns for the Yen and the Pound along virtually all frequency components. On the other hand, the Canadian Dollar/US Dollar misalignments are characterized by higher volatility after the adoption of the Plaza Accord.",

keywords = "Equilibrium exchange rates, Euro, Plaza Accord, Spectral analysis",

author = "Axel Grossmann and Orlov, {Alexei G.}",

year = "2012",

month = oct,

doi = "10.1016/j.iref.2012.03.001",

language = "American English",

volume = "24",

journal = "International Review of Economics and Finance",

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publisher = "Elsevier Inc.",

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T1 - Exchange Rate Misalignments in Frequency Domain

AU - Grossmann, Axel

AU - Orlov, Alexei G.

PY - 2012/10

Y1 - 2012/10

N2 - This research uses spectral methodology to study how the volatility of spot exchange rate misalignments changed as a result of (1) signing of the Plaza Accord and (2) introduction of the Euro. We study the deviations of Canadian Dollar/US Dollar, Japanese Yen/US Dollar and US Dollar/British Pound spot exchange rates from CPI- and TPI-based equilibrium exchange rates. The spectral density results indicate that the Plaza Accord and the introduction of the Euro helped reduce the volatility of exchange rate misalignments and excess returns for the Yen and the Pound along virtually all frequency components. On the other hand, the Canadian Dollar/US Dollar misalignments are characterized by higher volatility after the adoption of the Plaza Accord.

AB - This research uses spectral methodology to study how the volatility of spot exchange rate misalignments changed as a result of (1) signing of the Plaza Accord and (2) introduction of the Euro. We study the deviations of Canadian Dollar/US Dollar, Japanese Yen/US Dollar and US Dollar/British Pound spot exchange rates from CPI- and TPI-based equilibrium exchange rates. The spectral density results indicate that the Plaza Accord and the introduction of the Euro helped reduce the volatility of exchange rate misalignments and excess returns for the Yen and the Pound along virtually all frequency components. On the other hand, the Canadian Dollar/US Dollar misalignments are characterized by higher volatility after the adoption of the Plaza Accord.

KW - Equilibrium exchange rates

KW - Euro

KW - Plaza Accord

KW - Spectral analysis

UR - https://doi.org/10.1016/j.iref.2012.03.001

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DO - 10.1016/j.iref.2012.03.001

M3 - Article

SN - 1059-0560

VL - 24

JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

ER -

Exchange Rate Misalignments in Frequency Domain

Abstract

Keywords

DC Disciplines

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