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Correlations Between Reconstructedeurexchange Rates Versuschf,Dkk,Gbp,Jpyandusd

Author

Listed:
  • M. AUSLOOS

    (GRASP, University of Liège, Sart Tilman B5, B-4000 Liège, Belgium)

  • K. IVANOVA

    (Department of Meteorology, Pennsylvania State University, University Park, PA 16802, USA)

Abstract

On 1 January 1999, the European Union introduced a common currency Euro (EUR), to become the legal currency in all eleven countries which form theEUR. In order to test theEURbehavior and understand various features, theEURexchange rate is artificially extrapolated back to 1993 by a linear superposition of the exchange rates of the 11 currencies composingEURwith respect to several currencies not belonging to theEUR, i.e., Swiss Franc (CHF), Danish Kroner (DKK), British Pound (GBP), Japanese Yen (JPY) and U.S. Dollar (USD) of interest for reasons given in the text. The distribution of fluctuations of the exchange rates is shown to be Gaussian for the central part of the distribution, and having fat tails for the large size fluctuations. Within theDetrended Fluctuation Analysis(DFA) statistical method, we have obtained the power law behavior describing the root-mean-square deviation of the exchange rate fluctuations as a function of time. For the period between January 1995 and January 1999, we have compared the time-dependent exponent of these exchange rate fluctuations forEURand that of the 11 currencies which form theEUR. The German Mark (DEM) and the French Franc (FRF) have been the currencies primarily leading the fluctuations of the exchange rates, while Italian Lira (ITL) and Portuguese Escudo (PTE) are the less relevant currencies from this point of view. Technical considerations for theEURimplementation are given as conclusions. The cases of exchange rates withDKKappear quite different from the other four major currencies.

Suggested Citation

  • M. Ausloos & K. Ivanova, 2001. "Correlations Between Reconstructedeurexchange Rates Versuschf,Dkk,Gbp,Jpyandusd," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 169-195.
    • Handle: RePEc:wsi:ijmpcx:v:12:y:2001:i:02:n:s0129183101001572
    DOI: 10.1142/S0129183101001572
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    Cited by:

    1. Celeste, Valerio & Corbet, Shaen & Gurdgiev, Constantin, 2020. "Fractal dynamics and wavelet analysis: Deep volatility and return properties of Bitcoin, Ethereum and Ripple," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 310-324.
    2. Boilard, J.-F. & Kanazawa, K. & Takayasu, H. & Takayasu, M., 2018. "Empirical scaling relations of market event rates in foreign currency market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 1152-1161.

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