Foreign Exchange Rate Movements of Fragile Five Economies: Do They Follow the U.S. Dollar Index?
Abstract
In this paper, we examine the long-run relationship between Dollar Index and foreign exchange rates of ‘Fragile Five’ economies, respectively. We analyze foreign exchange rates of Turkey, Indonesia, Brazil, South Africa, India, and weighted average of the foreign exchange value of the US dollar against the currencies of both the broad group of major U.S. trading partners and group of the major currencies. We employ nonlinear cointegration framework and Granger causality tests on the weekly data covering January 2002 – June 2018. The empirical results that the foreign exchange rates do not have significant long-run relationship with the trade weighted US Dollar index. However, the dollar index does have significant impact on the foreign exchange rates of Fragile Five, respectively, in the short-run.
Keywords
Fragile Five,Dollar Index,Nonlinear Cointegration,Nonlinear Causality
Kaynakça
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