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We investigate the response of aggregate demand (AD) components and inflation to monetary policy (MP) shocks in the Tunisian context where studies on this issue are rare. By estimating SVAR models on historical data ending in 2021, we found that: i) The Tunisian Central Bank's (TCB) efforts to control inflation through interest rate tightening end up significantly slowing down private investment and consumption, while inflation response is not enough to mitigate the recently exacerbated inflationary trend; ii) Such efforts are hampered, if not outweighed, by the "pass-through" effect associated with exchange-rate continued depreciation; iii) The interest rate is Granger-caused by the exchange rate rather than the inflation rate, suggesting that de jure and de facto objectives of the TCB are divergent; and iv) The continued exchange rate depreciation alone is not enough to address the structural trade deficit. In light of these findings, we suggest that i) The transition from a discretionary MP to a rule-based inflation-targeting MP and with a well-defined role for the exchange rate, would help TCB gain credibility and improve efficiency of its MP; and ii) Tunisian policymakers should also consider consolidating MP in achieving its price stabilization objective particularly through implementing "supply-side policy" actions aiming at promoting economic growth and addressing unsustainable fiscal and external imbalances. [ABSTRACT FROM AUTHOR]

• Employment is wage-constrained and real depreciation raises exports. • Neither the real exchange rate nor exports affect domestic sales. • There is a lack of transmission from investment to growth. • Volatility effects are weak for exports and inconsistent for investment. • There is little evidence of an interest rate effect for investment. This paper evaluates South African manufacturing performance over 25 years. It reports the evolution of five basic variables: employment, mark-ups, exports, domestic sales, and investment, using an aggregated sample of firms from a reliable business database. The approach differs from other economic models by the complementary use of management perceptions in estimated equations. The results reinforce some previous findings; for example, wage pressure tends to constrain domestic sales while the relative wage incentivizes capital investment. The exchange rate matters for exports and investment is constrained by skill shortages. Other findings add evidence to contested issues such as the importance of the interest rate level for investment and exchange rate stability for export growth. Relationships between key variables can help to identify growth constraints and the potential for manufacturing jobs. In particular, the lack of transmission from exports to employment or to domestic sales and the response of the mark-up to investment suggest institutional failures in coordinating market activity. [ABSTRACT FROM AUTHOR]

This study examines the interdependence and asymmetries in the relationships between the economic policy uncertainty and the selected financial stability variables in Europe. Specifically, the impact of uncertainty on inflation, equity returns, the euro in US dollar exchange rate and interest rates is analyzed. The results show a significant negative impact of shocks in economic policy uncertainty on equity returns in Europe during the examined January 1987 – January 2023 period. Uncertainty shocks affect inflation asymmetrically at different time intervals. Asymmetric responses of interest rates and the exchange rate to uncertainty shocks are also found. The results suggest that economic policies in Europe should encompass efforts to mitigate economic uncertainty. [ABSTRACT FROM AUTHOR]

Macroeconomic indicators are crucial in the transitioning from the use of non-renewable energy (NRE) to renewable energy (RE). This study is an attempt to examine the relationship between RE and foreign exchange rate of the emerging economies, Brazil, China, Indonesia, India, Mexico, Russia and Turkey, the E7 economies. The study employs the dynamic ARDL bounds test approach from 1990 to 2019. The relationship between exchange rate and RE has not been widely done, yet this association is crucial considering the short-term high costs of RE and yet some countries import materials to harness RE, such as solar panels, due to poor technology in such countries. The current study differs from past studies that, it attempts to examine this association, in such a way that, provides a comparative analysis of the seven emerging countries. Past studies considered panel data analysis and single country analysis. The major findings of this study show that, different countries exhibit different links between RE and exchange rate, hence the need for region-specific studies to ensure proper policy making. Generally speaking, this research finds out that, GDP, BOP, real interest rate and RE promotes exchange rate appreciation, while inflation rate causes currency depreciation. Policy recommendations are also given, accordingly. [ABSTRACT FROM AUTHOR]

This study aims to test the hypotheses that a country's infrastructure deterioration leads to a fall in private investment as well as to a reduction in the private investment elasticities in relation to its determinants such as the real interest rate, real exchange rate, public investment, domestic credit and the infrastructure stock itself. These hypotheses, which are elaborated from the Post Keynesian view, are tested for the period 1985–2013, for 87 countries and two subgroups of low and high per capita income countries, using the estimators dynamic fixed effects, pooled mean group, and cross-sectionally augmented pooled mean group in a heterogeneous dynamic panel. The results highlight the positive impact of infrastructure on private capital formation. They also suggest that the physical deterioration of the infrastructure stock promotes declines in private investment elasticities, mitigating the private investment sensitivity to positive shocks as well as the effectiveness of economic policy in stimulating private investment through changes in its determinants. [ABSTRACT FROM AUTHOR]

• Countries that issue internationally acceptable currencies tend to have lower interest rates and higher price levels than those whose currencies are not internationally acceptable. • Differences in interest rates and price levels are likely to cause asymmetric transfers of biophysical resources from low-income to high-income countries. • Currency hierarchy can be empirically operationalized as a categorical variable based on the liquidity of currencies and the degree of monetary sovereignty of their issuers. • Ecologically unequal exchange is driven not only by diverging monetary compensation for exported resources, but also by the impact of currency hierarchy on countries' trade balances. • Alternative explanations for the empirical correlations between currency hierarchy, interest rates, price levels, and ecologically unequal exchange have theoretically and empirically limited. Asymmetric transfers of biophysical resources from the Global South to the North are a key obstacle to sustainable development. The underlying causal drivers of this 'ecologically unequal exchange' are not well understood. This paper accounts for the causal role of hierarchy between currencies as one driver of ecologically unequal exchange. Drawing on dependency theory, I propose testable hypotheses that explain why countries that issue internationally acceptable currencies create net inflows of embodied labour, land, energy, raw materials, and carbon from countries whose currencies lack international acceptability: Countries with lower-ranking currencies face higher interest rates, which constrain their policy space, drive income outflows, and necessitate resource exports. Such countries also tend to have lower price levels (measured as the ratio between exchange rates and purchasing power parity rates) because their currencies are not demanded internationally, resulting in reduced dollar income per exported resource. To test these hypotheses, I use a novel categorical operationalization of currency hierarchy. I compare different observable correlations to the theoretical correlations implied by the proposed hypotheses, and test multiple regression models against cross-country data. Overall, the results are consistent with the hypotheses. Considering alternative explanations, the conclusion seems justified that currency hierarchy is a significant driver of ecologically unequal exchange, and that this mechanism operates specifically through cross-country divergences in interest rates and exchange rates. In short, the monetary cost of a dollar impacts the biophysical cost of a dollar. [ABSTRACT FROM AUTHOR]

The current literature usually ignores the dependence between the rate of exchange and two interest rates, i.e., domestic and foreign ones, for the availability of analytical solutions to foreign exchange option prices, while such settings potentially limit the performance of these models. To address this, we introduce two new factors into the Heston–Hull–White model when foreign exchange options are evaluated. This newly formulated three-factor Heston–Hull–White model still admits a closed-form solution to foreign exchange option prices, which is successfully figured out based on the numeraire change technique and the obtained analytical expression of the characteristic function. Based on options on foreign exchange rate between US and Australian Dollar, both the three-factor and one-factor Heston–Hull–White models are calibrated using the Adaptive Simulated Annealing. When evaluating the performance of both models with in- and out-of-sample errors, the greater forecasting ability of the new model equipped with the two new factors over the one-factor Heston–Hull–White model is identified. • A three-factor stochastic volatility and interest rate model is formulated. • A full correlation structure is imposed among underlying, volatility and short rate. • An exact and analytical pricing formula for foreign exchange options is derived. • An empirical study shows the importance of introducing the two new factors. [ABSTRACT FROM AUTHOR]

We use the wavelet coherency analysis in order to investigate the relationship between the exchange rate changes and its major financial determinants for selected emerging economies. Our analysis shows that the changes in exchange rate are correlated with interest rate differentials, risk premium, the FED's monetary policy implementation and its policy uncertainty. Moreover, the co-movement between the exchange rate changes and its financial determinants substantially changes across frequencies and over time. The co-movement patterns also vary to a large extent across “fragile” emerging markets. Finally, the strongest co-movement of exchange rate changes is with the risk premium in all countries. [ABSTRACT FROM AUTHOR]

This paper examines the international spillover effects of China's monetary policy shock on macro and financial variables in 26 countries along the Belt and Road (B&R) from 2000 to 2019. We find that a surprise Chinese monetary tightening brings about a widening in the short-term interest rate spread, a drop in the equity price, nominal depreciation against the RMB and real depreciation, and an improvement in the trade balance, on average, across the 26 B&R countries. Moreover, substantial heterogeneous effects emerge in the responses of the foreign real exchange rate and the trade balance in different groups in terms of the 26 countries' trade weights with China, capital openness, and national income levels. Finally, all the empirical evidence reveals that the expenditure switching effect plays an important role in facilitating the international transmission of China's monetary policy shock. • Estimates China's monetary policy shock series via a large Bayesian VAR model. • Examines the cross-border transmission of the shock via local projections. • Finds significant spillover effects of China' monetary policy shock abroad. • Finds heterogeneities in the spillover effects for different country groups. • Finds the expenditure switching effect is key in the monetary policy transmission. [ABSTRACT FROM AUTHOR]

Foreign currency debt provides additional access to capital and offers funds in favorable and flexible terms to microfinance institutions (MFIs). Yet, we find that the use of foreign currency debt, on average, leads to higher microcredit interest rates. We also find that MFIs operating in countries with pegged exchange rate regimes and profit MFIs are better able to mitigate foreign currency risk. The results of the paper suggest that local currency debt is a better option for MFIs if the goal is to provide microcredit at lower interest rates. [ABSTRACT FROM AUTHOR]

This paper investigates the dynamic relationship between Japanese Yen exchange rates and market anxiety during the period from January 5, 1998 to April 18, 2016. A quantitative technique of multifractal detrended cross-correlation analysis (MF-DCCA) is used to explore the multifractal features of the cross-correlations between USD/JPY, AUD/JPY exchange rates and the market anxiety gauge VIX. The investigation shows that the causal relationship between Japanese Yen exchange rates and VIX are bidirectional in general, and the cross-correlations between the two sets of time series are multifractal. Strong evidence suggests that the cross-correlation exponents tend to exhibit different volatility patterns in response to diverse external shocks such as financial distress and widening in interest rate spread, suggesting that the cross-correlated behavior between Japanese Yen exchange rates and VIX are susceptible to economic uncertainties and risks. In addition, the performances of two market anxiety gauges, the VIX and the TED spread, are compared and the sources of multifractality are also traced. Thus, this paper contributes to the literature by shedding light on the unique driving forces of the Yen exchange rate fluctuations in the international foreign exchange market. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between oil prices and exchange rates in three African countries using a Vector AutoRegressive (VAR) model. We use daily data on nominal exchange rates, oil prices and short term interbank interest rates from 01/12/2003 to 02/07/2014. The results suggest that the exchange rate of the three selected countries behavior is different in the event of an oil price shock, not only before and after the oil peak of July of 2008, but also between each other. Therefore, no general rule can be made for net oil importing sub-Saharan countries, such as Botswana, Kenya and Tanzania. We conclude that after an oil price peak, the Botswanan pula clearly appreciates against the US dollar, the Kenyan and Tanzanian shilling. [ABSTRACT FROM AUTHOR]

The impact of news releases related to the inflation targeting regime on the financial market is analyzed by estimating a bivariate VAR GARCH-BEKK-in-mean model. We use daily data, from January 2006 to May 2017, of stock prices index (IBOVESPA), exchange rate (BRL/USD) and interbank deposit rate (DI360). We developed a positive and negative news index to measure the impact of news releases based on Caporale et al. (2016) and Caporale et al. (2018). Although the literature on the subject is vast, this paper fills relevant gaps in three ways. First, we investigate the bidirectional relationship between monetary policy related news releases and the behavior of asset prices before and after the 2008 crisis in Brazil. Second, we consider the relationship between the second moments of the variables of interest, using the conditional volatility as a proxy for uncertainty. Third, we provide a time series approach to measure the effect of macroeconomic related news releases on financial asset returns. The results indicate there are mean spread effects from news for the exchange rate and the Brazilian stock index: (i) the GARCH-in-mean parameter is statistically significant for positive and the difference of news for the DI360; (ii) monetary policy and external shocks are statiscally significant as expected with exception of the external shocks for the Brazilian stock index; and (iii) there are volatility spillovers and changes of this volatility after the crisis for stock index and DI360. [ABSTRACT FROM AUTHOR]

This paper introduces the multiple linear regression heavy ordered weighted average (MLR-HOWA) operator. On the MLR-HOWA operator, the beta values are obtained with the use of the HOWA means. In that sense, it provides a new range of possibilities by under or overestimating the result based on the decision maker's expectations and knowledge. Therefore, the MLR-HOWA provides a forecasting tool that can analyze multiple scenarios from minimum to maximum. The main properties and two extensions using induced and generalized variables are also presented. An application in exchange rate forecasting based on inflation and interest rate as independent variables for five Latin American countries is submitted. Among the main results, it is possible to identify that the forecasting error is reduced when different combinations of MLR with OWA operators are done. [ABSTRACT FROM AUTHOR]

Summary: This paper discusses the way in which the existence of foreign currency debt affects debt-sustainability analysis. We show that a devaluation of the local currency can significantly change the path of a sustainable fiscal policy. Our model expands previous research as the adjustment comes not only through changes in the value of the foreign-currency-denominated debt, but also through the effects of the devaluation on interest rates and economic growth. We find that the fiscal adjustment required after a devaluation increases with the size of the devaluation, the length of the adjustment period, the effect on interest rates and growth, and the share of public debt denominated in foreign currency. [ABSTRACT FROM AUTHOR]

Summary: Following the recently-developed bounds testing approach, the paper analyzes the long-run determinants of the Mexican peso’s real exchange rate from 1988Q1 to 2008Q2. Controlling for the standard determinants, the paper shows that all types of capital inflows tended to appreciate the peso. In contrast to recent multi-country studies, it finds no evidence of a less harmful effect from foreign direct investment (FDI)—on the contrary, the FDI’s appreciation effect can be particularly strong—and interprets this finding. The paper also shows that monetary policy, through changes in the short-term interest differential, can have persistent, level effects on the real exchange rate. [ABSTRACT FROM AUTHOR]

Abstract: The classical financial models are based on the standard Brownian diffusion-type processes. However, in the exhibition of some real market data (like interest or exchange rates) we observe characteristic periods of constant values. Moreover, in the case of financial data, the assumption of normality is often unsatisfied. In such cases the popular Vasiček model, that is a mathematical system describing the evolution of interest rates based on the Ornstein–Uhlenbeck process, seems not to be applicable. Therefore, we propose an alternative approach based on a combination of the popular Ornstein–Uhlenbeck process with a stable distribution and subdiffusion systems that demonstrate such characteristic behavior. The probability density function of the proposed process can be described by a Fokker–Planck type equation and therefore it can be examined as an extension of the basic Ornstein–Uhlenbeck model. In this paper, we propose the parameters’ estimation method and calibrate the subordinated Vasiček model to the interest rate data. [Copyright &y& Elsevier]

Summary: We investigate inflation targeting (IT) in emerging markets, focusing on the role of the real exchange rate and the distinction between commodity and non-commodity exporters. IT emerging markets appear to follow a “mixed strategy” whereby both inflation and real exchange rates are important determinants of policy interest rates. The response to real exchange rates, however, is more constrained than in non-IT regimes. We also find that the response to real exchange rates is strongest in those countries following IT policies that are relatively intensive in exporting basic commodities; and present a theoretical model that explains these empirical results. [ABSTRACT FROM AUTHOR]

Abstract: Price clustering can be a source of market inefficiency. It follows that searching for price clustering in markets have gone beyond share prices into real estate, interest rate, and exchange rate markets. In this paper, we extend this line of research to oil futures markets. In particular, we consider five different forms of oil futures contracts and test for evidence of price clustering. Our results reveal strong presence of price clustering in the oil futures market. This finding implies that price clustering can potentially be a source of oil market inefficiency, which can influence trading strategies. [ABSTRACT FROM AUTHOR]

Abstract: Oil price inflation may have had a significant role in pushing the world economy into its worst post-war recession during 2008–2009. Reserve currency central banks pursued an overly expansionary monetary policy during 2001–2009, in the form of low or negative real interest rates and accompanied by a rapidly falling US dollar, while paying inadequate attention to the destabilizing effects on oil markets. In this paper, we show that monetary policy variables, namely key interest rates and the US dollar exchange rate, had a powerful effect on oil markets. World oil demand was significantly influenced by interest and dollar exchange rates, while oil supply was rigid. Oil demand and supply have very low price elasticity and this characteristic makes oil prices highly volatile and subject to wider fluctuations than the prices of other commodities. Aggressive monetary policy would stimulate oil demand, however, it would be met with rigid oil supply and would turn inflationary and disruptive to economic growth if there was little excess capacity in oil output. We argue that a measure of stability in oil markets cannot be achieved unless monetary policy is restrained and real interest rates become significantly positive. Monetary tightening during 1979–1982 might imply that monetary policy has to be restrained for a long period and with high interest rates in order to bring stability back to oil markets. [Copyright &y& Elsevier]

Abstract: Owing to the fluctuations in the financial markets from time to time, some input variables, in particular the interest rate, spot exchange rate and volatility, in the Garman–Kohlhagen model [M.B. Garman, S.W. Kohlhagen, Foreign currency option values, Journal of International Money and Finance 2 (1983) 231–237] cannot be expected in a precise sense. Therefore, the fuzzy set theory introduced by Zadeh [L.A. Zadeh, Fuzzy sets, Information and Control 8 (1965) 338–353] can provide a useful tool to deal with this kind of impreciseness. In this paper, three different versions of the G–K model, the put-call parity relationship and the calculation formulas of the Greek letters according to these three different G–K models are then proposed based on fuzzy set theory. Under the considerations of fuzzy foreign and domestic interest rates, fuzzy spot exchange rate and fuzzy volatility, the European currency option prices and the Greek letters turn into fuzzy numbers or closed intervals. This means that the investors can pick any European currency option price and Greek letters with an acceptable belief degree or belief degree weighting parameter for his later use. The empirical results indicate that the Greeks calculated under fuzzy environment can be considered as a useful tool for managing option risk for an option writer. [Copyright &y& Elsevier]

Summary: What causes developing countries to receive different levels of international remittances? This paper addresses this question by using new data on such variables as the skill composition of migrants, poverty, and interest and exchange rates to examine the determinants of remittances. The paper finds that the skill composition of migrants does matter in remittance determination. Countries which export a larger share of high-skilled (educated) migrants receive less per capita remittances than countries which export a larger proportion of low-skilled migrants. It also finds that the level of poverty in a labor-sending country does not have a positive impact on the level of remittances received. [Copyright &y& Elsevier]

Abstract: This paper shows that countries characterized by a financial accelerator mechanism may reverse the usual finding of the literature — flexible exchange rate regimes do a worse job of insulating open economies from external shocks. I obtain this result with a calibrated small open economy model that endogenizes foreign interest rates by linking them to the banking sector''s financial leverage. This relationship renders exchange rate policy more important compared to the usual exogeneity assumption. I find empirical support for this prediction using the Local Projections method. Finally, 2nd order approximation to the model finds larger welfare losses under flexible exchange rate regimes. [Copyright &y& Elsevier]

Abstract: The present study tries to examine the behaviour of various Indian interest rates such as call money rate, and yields on secondary market securities with maturity periods of 15–91 days, 1-year, 5-years and 10-years. In the first stage, the study investigates the determinants of interest rates and finds that although the interest rates depend on some domestic macroeconomic variables such as yield spread and expected exchange rate, they are mainly affected by the movements of international interest rates, although with some lags. The policy variables such as Bank Rate and Federal Funds Rate did not show any significant impact on any of the interest rates. Further, it was found that the interest rates in the very recent period show some cyclical movements similar to that of the developed countries. Future behaviour of interest rates show that the present cycle of each interest rate would peak at different time points. This expected behaviour in domestic interest rates could be due to the integration of the domestic economy with the international money and financial market. This trend may be same in most of the emerging economies of Asia. [Copyright &y& Elsevier]

Abstract: This paper considers whether the influence of national output and inflation rates on ECB interest rate setting should reflect a country''s weight in the eurozone economy. The findings depend on interest rate and exchange rate elasticities and openness vis-à-vis non-eurozone countries. The major conclusion is that the ECB should respond less to inflation shocks in EMU countries that have extensive trading ties with non-eurozone countries. These countries can take care of some of the monetary tightening themselves, through a real appreciation vis-à-vis their non-eurozone trading partners. [Copyright &y& Elsevier]

Abstract: In a simple linear rational expectations model in which monetary authorities act to stabilize the exchange rate and also to mitigate adverse effects on real activity, a rise in interest rate is followed by exchange rate depreciation. In daily data across VAR and VECM models a rise in interest rate is associated with significant exchange rate depreciation for Thailand, the Philippines, and Korea. Depreciation and increases in the interest rate raise business failures that intensify crisis. Crisis management of the exchange rate must consider damaging effect of restrictive policy on financially constrained banking sector and non-financial firms. [Copyright &y& Elsevier]

Abstract: This paper empirically reassesses the seemingly opposite interpretations of the causality running between the US interest rate and the dollar exchange rate, focusing especially on the 1980s. We conclude that the Reagan administration''s strong dollar actually lowered the US interest rate, at least in the short-run during the first half of the 1980s. However, we find that the causal relationship was time-varying, mainly triggered by changes in the investor''s exchange rate expectations. Estimation results also support Frankel and Froot''s [Frankel, J., and Froot, K. (1987). Using survey data to test standard propositions regarding exchange rate expectations. The American Economic Review 77, 133–153] argument that the extrapolative expectations prevailed in the early 1980s. These findings help to understand the so-called “erratic movement” of the US dollar in the 1980s. In particular, they give potentially very useful policy implications to the recent US economic tribulation and associated policy. [Copyright &y& Elsevier]

This paper examines the information content of COPOM decisions by estimating the responses of the term structure to changes in target short-term interest rates on COPOM meeting days. Within an event-study approach empirical evidence suggests that the introduction of the floating exchange rate and the inflation targeting (IT) regime have had a dampening effect on interest rate surprises along the term structure. [Copyright &y& Elsevier]

This paper develops a Vector Error Correction (VEC) model and uses the recently developed technique of ‘generalized’ impulse response analysis to test the empirical relationships in the Colombian economy between coffee revenues and a set of macro variables. We find that coffee price (revenue) shocks have exerted an important influence on money growth, inflation, and real exchange rates, and the direction of these effects are in line with some of the predictions of traditional Dutch Disease type models. The major difference between our results and the results of Dutch Disease type models arise in the effects of coffee booms on real output. We find that in the time horizon of 5 years after the boom, real output has increased in response to the effects of the coffee boom. The finding that coffee booms can result in positive long-run output effects is an important finding since it contradicts the traditional conclusion of Dutch Disease type models which envision an adverse long-run effect on output. We also find that the long-run effect of coffee booms is to reduce both current account and government deficits. These results illustrate strikingly that the term “Dutch Disease” is an unfortunately pejorative term that obscures the fact that coffee booms need not be viewed as a “disease” but as an extraordinary opportunity to strengthen internal and external balances. [Copyright &y& Elsevier]

We apply the Multifractal detrended moving average analysis (MF-DMA) and the Multifractal Cross-Correlation Analysis(MFCCA) to study the cross-correlation behaviors between foreign exchange markets and interest rate differentials. Our empirical results obtained from the cross-correlation test, q DCCA coefficient and MFCCA confirm the existence of strong multifractality cross-correlations between foreign exchange rates and interest rate differentials. Foreign exchange rate has a stronger cross-correlation with short-term interest rate differentials in Australia, Canada, Japan, the United Kingdom (UK), and European Union (EU), and with long-term interest rate differentials in China, respectively. The results of rolling window analysis suggest varying cross-correlations between the exchange rates and interest rate differentials during the sample period. In addition, the cross-correlations between exchange rates and interest spreads vary with period, country and maturity of the spreads. • Cross-correlations between FX and interest rate differentials are investigated using MF-DMA and MFCCA. • We confirm the existence of strong multifractality cross-correlations between FX and interest rate differentials. • The efficiency of the CNY exchange rate is found to be the weakest among six FX markets. • The cross-correlations vary with period, country and maturity of the spread. [ABSTRACT FROM AUTHOR]

Analyzes the transmission of short-term interest rate policies aimed at exchange rate stabilization or money stock targeting, and addresses the usefulness of reserve requirements imposed to sustain these policies. Financial behavior of the private sector; Factors that determine the amount of government bonds held abroad; Monetary policy of the central bank.

We study the uncovered interest rate parity in the European Union utilising the newly proposed regression frameworks based on the detrended cross-correlation analysis and the detrending moving-average cross-correlation analysis. The parity is analysed for three groups — the early Euro adopters, the later adopters, and the EU countries that are outside of the Eurozone. The main contributions of our study are twofold. First, we have analysed a large dataset that is not standard in the topical applied papers. And second, the utilised methods have allowed us to focus on possible differences between the short-term and long-term relationships between the interest rate differentials and foreign exchange rates that form the parity. Overall, the evidence for the parity is scarce, which is in hand with most of the previous studies. However, we have also uncovered some interesting patterns in the results and we provide an additional discussion of possible causes and directions for future research. • Uncovered interest rate parity is studied with novel fractal methods. • Three groups of the EU countries are studied. • Evidence for the parity is scarce but scale dependence is uncovered. • Depreciation effects are visible in the long run, but are negligible in the short run. [ABSTRACT FROM AUTHOR]

Through multifractal detrended moving-average cross-correlation analysis (MF-X-DMA) and partial moving-average cross-correlation coefficient analysis (PDMCA), this paper studies power-law cross-correlations between renminbi (RMB) onshore and offshore markets (2013–2018). The interaction between CNY and CNH market pairs was examined with attention to how the floating exchange rate regime reform of August 11, 2015 affects their interactions. The obtained results suggest that net power-law cross-correlations exist between the CNY and CNH exchange markets (with influences of autocorrelation, interest rate difference, US Dollar, and Oil signals removed) and that the August 11, 2015 (referred to as "811") exchange reform significantly affects the trend of multiscale cross-correlation coefficient curves. This study also verifies that the risk of offshore RMB markets in Europe and the UK is larger than in Hong Kong and the US when facing a large shock. The nonlinear causal effect analysis reveals that asymmetric bidirectional nonlinear causality exists between any market pair, and the degree of asymmetry appears to have declined after the 811 exchange rate regime reform. For the offshore RMB markets in the US, Europe, and UK, there is evidence of stronger causality running from the CNH to CNY than vice versa, which implies that the foreign impulses have had an influence on the domestic market, and the floating exchange rate reform effectively improves the RMB exchange rate formation mechanism. • We examine the net power-law cross-correlations between onshore and offshore renminbi exchange markets. • Asymmetric bidirectional causality between the onshore and offshore exchange rates is found. • The floating exchange rate reform effectively improves the RMB exchange rate formation mechanism. [ABSTRACT FROM AUTHOR]