Extreme co-movements and dependencies among major international exchange rates
Résumé
This paper investigates the bivariate dependence structure between four international exchange rates (EUR, GBP, CAD, JPY), against the US Dollar, using daily data for the time-span 1999-2014. We use different time-invariant and time-varying copula functions, with different forms of tail dependence, and discover a positive dependence between all exchange rates, although the dependence is less strong for the JPY-pairs of exchange rates. Furthermore, we find evidence of symmetric tail dependence. Finally, the dependence is time-varying and intensifies after the onset of the recent global financial crisis, with the exception of the JPY-pairs. These findings provide additional insight for international investors, risk managers and for policy makers, given the fact that the tail dependence is either positive or negative, is time-changing, and have different structures.