We utilize the cross-quantilogram method to assess the predictive capacity of geopolitical risk (GPR) on volatility spillovers calculated by the time-varying parameter vector autoregressive model, ...across international commodity, exchange, and U.S. and Chinese stock markets. The findings yield three notable observations: First, we establish the directional predictive influence of GPR on net and net pairwise volatility spillovers, indicating discernible shifts in the risk roles of specific markets and transmission pathways. Second, these shifts, anticipated by GPR, manifest swiftly within a single day and subside within a quarter, albeit with varying durations contingent on market categories and transmission pathways. Third, disparities are evident in the predictive effectiveness of geopolitical acts and geopolitical threats. These findings remain robust even when considering factors such as economic policy uncertainty, alternative proxies, and other spillover models.
•We study predictive power of geopolitical risk for cross-market volatility spillovers.•Geopolitical risk has the capacity to forecast the direction of spillovers.•The Network structure changes subsequent to GPR intensification.•GPT’s predictive ability differs from GPA’s, resembling GPR’s more closely.
This research examines the foreign exchange (FX) market from the perspective of currency network. We construct the network based on correlations between exchange rates of 37 currencies from 2006 to ...2012. The minimum spanning tree (MST) is used to generate a simplified network and bootstrap technique is employed to test the reliability of links. The full correlation matrices are further analyzed to support and test the robustness of the results from the MSTs. Specifically, we compare the results in the pre-crisis period (2006–2007) and the post-crisis period (2011–2012) to show the impact of the 2008 global financial crisis on the FX market. We have the following findings: (a) the currency network is more scattered in the post-crisis period; (b) the connections between currencies tend to be more internal within the geographic region after the crisis; (c) the European currencies maintain strong connections and keep their clustering feature stable.
•The currency network gets more scattered in the post-crisis period.•The connections become more internal within the geographic region after the crisis.•The European currencies maintain strong connections and stable clustering feature.
Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992–3 crisis in the European Monetary System, allowing us to ...pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor in the crisis: the role of the weak dollar in intra-EMS tensions. We provide new evidence of the contribution of a falling dollar-Deutschmark exchange rate to pressure on EMS currencies.
By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the ...key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countries in the world such as Asia or East Europe, the key currencies are generally given by major economic countries as expected.
This article provides a new framework to evaluate the status of Renminbi internationalization. It proposes that the trading patterns of a currency in the global foreign exchange market embody the ...currency's position in the international monetary system. Based on foreign exchange trading data provided by CLS Group, the article constructs a ranking of major international currencies including the Renminbi. It finds that the Renminbi shares more similarities in foreign exchange trading patterns with the established global currencies like the US dollar and the Euro than with those regional currencies. The article also explores the policy implications that the new evaluation approach provides.
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