Economic and political effects on currency clustering dynamics

Abstract

The symbolic performance of a currency describes its position in the FX markets independent of a base currency and allows the study of central bank policy and the assessment of economic and political developments

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

M. Kremer http://orcid.org/0000-0001-9130-7670

A. P. Becker http://orcid.org/0000-0002-6424-0658

Notes

† The accounting currency of the IMF are the so-called Special Drawing Rights, and as of 2018 their value is determined through a weighted basket of the US dollar, euro, Japanese yen, British pound and Chinese yuan.

‡ http://developer.oanda.com

† For example, http://www.banxico.org.mx/sistema-financiero/estadisticas/mercado-cambiario/banco-mexico-s-foreign-exchan.html

‡ For example, http://www.reuters.com/article/global-forex-boj-idUSL8N15Q4BY

† By using the absolute values of the symbolic performances, we reduce the dimensionality from K to K/2, and by applying the ilr transformation, we further reduce it to $K/2-1$. This mitigates the problem of sparsity of high-dimensional spaces significantly.

‡ We make use of this feature in our cluster analysis by considering only the absolute value of the symbolic performance and its distribution.

† Bank for International Settlements, http://www.bis.org/publ/rpfx16.htm

‡ https://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html

† Speech by Mr Fritz Zurbrügg, Member of the Governing Board of SNB, https://www.bis.org/review/r150330c.pdf

‡ http://uk.reuters.com/article/uk-swiss-snb-idUKKBN15S1NU

§ https://www.ft.com/content/7129d13c-d364-11e6-9341-7393bb2e1b51

Additional information

Funding

MK thanks Thomas Guhr for financial support for a research stay at the Center for Polymer Studies, Boston University. This work was partially supported by the National Science Foundation [NSF SES 1452061].