Causal relationship testing with applications to exchange rates

Brailsford, T. J., Penm, J. and Terrell, R. D. (2008) Causal relationship testing with applications to exchange rates. International Journal of Electronic Finance, 2 1: 50-69. doi:10.1504/IJEF.2008.016884

Author Brailsford, T. J.
Penm, J.
Terrell, R. D.
Title Causal relationship testing with applications to exchange rates
Journal name International Journal of Electronic Finance   Check publisher's open access policy
ISSN 1746-0069
Publication date 2008
Year available 2008
Sub-type Article (original research)
DOI 10.1504/IJEF.2008.016884
Volume 2
Issue 1
Start page 50
End page 69
Total pages 20
Editor B. Lin
Place of publication Geneva, Switzerland
Publisher Inderscience Publishers
Collection year 2009
Language eng
Subject C1
150202 Financial Econometrics
900101 Finance Services
900102 Investment Services (excl. Superannuation)
Abstract This paper undertakes two causality studies with exchange rate applications in a framework of Zero-Non-Zero (ZNZ) patterned Vector Error-Correction Modelling (VECM). The first study shows that money supply is a source of financial and economic influence on the Euro. The second gives evidence of support for Purchasing Power Parity (PPP) using monthly data between Japan and the USA. The results indicate that high-frequency finance data can reveal the existence of long-term PPP. This evidence sheds light on the adjustment mechanisms through which PPP is achieved. Also, the proposed ZNZ patterned VECM modelling allows better insights from this kind of financial time-series analysis.
Keyword error correction modelling
Granger causality
purchasing power parity
electronic finance
causal relationships
exchange rates
money supply
United States
Q-Index Code C1
Q-Index Status Confirmed Code

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2009 Higher Education Research Data Collection
UQ Business School Publications
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Created: Thu, 13 Mar 2008, 12:33:41 EST by Karen Morgan on behalf of UQ Business School