Complutense University Library

The US Dollar-Euro exchange rate and US-EMU bond yield differentials: A Causality Analysis


Sosvilla Rivero, Simón Javier and Ramos-Herrera, Maria del Carmen (2011) The US Dollar-Euro exchange rate and US-EMU bond yield differentials: A Causality Analysis. [ Working Paper; nº 07, 2011, ]

Creative Commons Attribution Non-commercial.


Official URL:


This paper test for causality between the US Dollar-Euro exchange rate and US-EMU bond yield differentials. To that end, we apply Hsiao (1981)’s sequential procedure to daily data covering the 1999-2011 period. Our results suggest the existence of statistically significant Granger causality running one-way from bond yield differentials to the exchange rate, but not the other way around.

Resumen (otros idiomas)

Este trabajo realiza un contraste de causalidad entre el tipo de cambio dólar estadounidense-euro y el diferencial de rendimiento de los bonos entre Estados Unidos y la Zona Euro. Para ello, se aplica el procedimiento secuencial de Hsiao (1981) a datos diarios para el período 1999-2011. Nuestros resultados sugieren la existencia de causalidad en el sentido de Granger estadísticamente significativa desde el diferencial de rendimiento de los bonos hacia el tipo de cambio, pero no a la inversa.

Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Causality; Exchange rate; Long-term interest rates; Rolling regression
Palabras clave (otros idiomas):Causalidad, tipo de cambio; Tipos de interés a largo plazo; Procedimiento de regresión móvil con ventana fija
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Stock exchanges
Social sciences > Economics > World economy
Series Name:Working Paper
ID Code:12898

Akaike, H. (1969), “Fitting autoregressive models for regression”, Annals of the Institute of Statistical Mathematics, Vol. 21, pp. 243-247.

Alexius, A. (2001), "Uncovered interest parity revisited", Review of International Economics, Vol. 9, pp. 505–517.

Carrión-i-Silvestre, J. L., Sansó-i-Roselló, A., Ortuño, M. A. (2001), “Unit root and stationarity tests’ wedding”, Economics Letters, Vol. 70, pp. 1–8.

Chinn, M. and Meredith, G. (2004): "Monetary policy and long-horizon uncovered interest parity", IMF Staff Papers, Vol. 51, pp. 409–430.

Engel, C. (1996): "The forward discount anomaly and the risk premium: A survey of recent evidence", Journal of Empirical Finance, Vol. 3, pp. 123–192.

Flood, R. P. and Taylor, M. P. (1996), "Exchange rate economics: what’s wrong with the conventional macro approach?", in: Frankel, J., Galli, G. and Giovanni A. (eds.): The Microstructure of Foreign Exchange Markets, Chicago, pp. 262–301.

Granger, C. W. J. (1969), “Investigating Causal Relations by Econometric Models and Cross-spectral Methods”, Econometrica. Vol. 37, pp. 24-36.

Hsiao, C. (1981), “Autoregressive modelling and money-income causality detection”, Journal of Monetary Economics, Vol. 7, pp. 85–106.

Johansen, S. (1991), “Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models”, Econometrica.Vol. 59, pp. 1551–1580.

Johansen, S. (1995), Likelihood-based inference on cointegrated vectors autoregressive models. Oxford: Oxford University Press.

Kwiatkowski, D. Phillips, P. C. B., Schmidt, P. and Shin, Y. (1992): “Testing the null hypothesis of stationarity against the Alternative of a unit root”, Journal of Econometrics, Vol. 54, pp.159–178.

Thornton, D. L., and Batten, D. S. (1985). “Lag-length selection and tests of Granger causality between money and income”, Journal of Money, Credit, and Banking, Vol. 27, pp. 164-178.

Williams, E.J. (1959): Regression analysis. New York, Wiley.

Deposited On:06 Jul 2011 12:37
Last Modified:26 Apr 2016 11:33

Repository Staff Only: item control page