Granger causality from exchange rates to fundamentals: What does the bootstrap test show us?

Hsiu Hsin Ko; Masao Ogaki

doi:10.1016/j.iref.2015.02.016

Granger causality from exchange rates to fundamentals: What does the bootstrap test show us?

Hsiu Hsin Ko, Masao Ogaki

経済学部

研究成果: Article › 査読

11 被引用数 (Scopus)

抄録

We use a residual-based bootstrap method to re-examine the finding of the Granger causality relation from exchange rates to fundamentals in Engel and West (2005), in which the relation is taken as evidence for their explanation for the present-value model for exchange rates. Our test results are against the previous findings. The Monte Carlo experiment results suggest that the previous evidence for the causality relation from exchange rates to fundamentals is very likely caused by the size distortion. Hence, the existing Granger causality evidence is not strong enough to validate the new explanation for the present-value model.

本文言語	English
ページ（範囲）	198-206
ページ数	9
ジャーナル	International Review of Economics and Finance
巻	38
DOI	https://doi.org/10.1016/j.iref.2015.02.016
出版ステータス	Published - 2015 7月 1

ASJC Scopus subject areas

財務
経済学、計量経済学

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10.1016/j.iref.2015.02.016

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引用スタイル

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title = "Granger causality from exchange rates to fundamentals: What does the bootstrap test show us?",

abstract = "We use a residual-based bootstrap method to re-examine the finding of the Granger causality relation from exchange rates to fundamentals in Engel and West (2005), in which the relation is taken as evidence for their explanation for the present-value model for exchange rates. Our test results are against the previous findings. The Monte Carlo experiment results suggest that the previous evidence for the causality relation from exchange rates to fundamentals is very likely caused by the size distortion. Hence, the existing Granger causality evidence is not strong enough to validate the new explanation for the present-value model.",

keywords = "Bootstrap test, Exchange rates, Fundamentals, Granger causality",

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T2 - What does the bootstrap test show us?

AU - Ko, Hsiu Hsin

AU - Ogaki, Masao

N1 - Funding Information: The authors thank Carl R. Chen (the editor), the referees, the Ohio State University, and in particular, Paul Evans, Pok-Sang Lam for useful comments and suggestions. Ogaki's research was partially supported by JSPS KAKENHI 25285063 . Publisher Copyright: © 2015 Elsevier Inc.

PY - 2015/7/1

Y1 - 2015/7/1

N2 - We use a residual-based bootstrap method to re-examine the finding of the Granger causality relation from exchange rates to fundamentals in Engel and West (2005), in which the relation is taken as evidence for their explanation for the present-value model for exchange rates. Our test results are against the previous findings. The Monte Carlo experiment results suggest that the previous evidence for the causality relation from exchange rates to fundamentals is very likely caused by the size distortion. Hence, the existing Granger causality evidence is not strong enough to validate the new explanation for the present-value model.

AB - We use a residual-based bootstrap method to re-examine the finding of the Granger causality relation from exchange rates to fundamentals in Engel and West (2005), in which the relation is taken as evidence for their explanation for the present-value model for exchange rates. Our test results are against the previous findings. The Monte Carlo experiment results suggest that the previous evidence for the causality relation from exchange rates to fundamentals is very likely caused by the size distortion. Hence, the existing Granger causality evidence is not strong enough to validate the new explanation for the present-value model.

KW - Bootstrap test

KW - Exchange rates

KW - Fundamentals

KW - Granger causality

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Granger causality from exchange rates to fundamentals: What does the bootstrap test show us?

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