A Spectral Analysis of the Relationships between Major Exchange Rate and Their Fundamentals

• Main Authors: Ke-Chih Wang, 王克之
• Other Authors: YU-LI WANG
• Format: Others
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/29549779286152276015

碩士 === 國立東華大學 === 經濟學系 === 104 === In this paper, we apply spectral analysis to discuss the relationships between major exchange rates and their fundamental price differences with the US dollars. The data include Canadian dollar , British pound, Japanese yen , Swiss franc, Australian dollar and the euro, totally six exchange rates to the US dollar. And the differences in the CPI for the studied country pairs. The sample period is from 1971 to 2014 with monthly and quarterly data. We apply Welch window function in our time series data transformation to obtain the average power spectrum in order to calculate the coherence between two variables. The empirical results are summarized under several different numbers of windows. We find significant lead-lag relationship between exchange rates and price differences for Canadian dollar , British pound and Swiss franc over certain frequencies for the numbers of windows we selected and tested. In the case of Canadian dollar the CPI differences between CA and US lead the exchange movements at the 11~12 month-period.In the case of British pound, the CPI differences between UK and US lead the exchange movements at the 8 month-period. In the case of Swiss franc, the exchange rate leads the price difference at the 21~22 month-period. We also find some significant coherence between other exchange rates and their fundamentals under part of the numbers of windows tested.