RDP 8608: Exchange Rate Regimes and the Volatility, of Financial Prices: The Australian Case Appendix A: Excluding Japan

Robert G. Trevor and Stephen G. Donald

July 1986

EXCLUDING JAPAN[*]

Table A1
Granger-Causality Test Results: Pre-Float
(Marginal Significance Levels)
Equation
 		 Explanatory Variable
AUSTWI AUSRATE USTWI USRATE DMTWI DMRATE FOREIGN
AUSTWI – .0001 .4620 .0256 .3873 .2825 .0092
AUSRATE .0569 – .1350 .3499 .3579 .6165 .0281
USTWI .5934 .9417 – .2877 .1627 .7813 –
USRATE .2198 .2038 .0003 – .1545 .3601 –
DMTWI .0566 .0256 .4195 .8703 – .0540 –
DMRATE .0229 .4551 .5871 .0235 .0065 – –
Table A2
Granger-Causality Test Results: Post-Float
(Marginal Significance Levels)
Equation
 		 Explanatory Variable
AUSTWI AUSRATE USTWI USRATE DMTWI DMRATE FOREIGN
AUSTWI – .1710 .0016 .7709 .0086 .0004 .0001
AUSRATE .5762 – .2104 .2333 .8548 .1370 .0906
USTWI .8869 .3872 – .0862 .8400 .7260 –
USRATE .8445 .1784 .9837 – .4730 .7251 –
DMTWI .4607 .0102 .0002 .0231 – .5759 –
DMRATE .3470 .0074 .0533 .0055 .1038 – –
Table A3
Correlation Matrix: Pre-Float
Equation
 		 Explanatory Variable
AUSTWI AUSRATE USTWI USRATE DMTWI DMRATE
AUSTWI 1 .4691 −.0325 .0433 −.0360 .1229
AUSRATE   1 .0000 .0769 .0075 .0052
USTWI     1 .4160 −.5139 .0100
USRATE       1 −.3164 .0101
DMTWI         1 −.0227
DMRATE           1
Table A4
Correlation Matrix: Post-Float
Equation
 		 Explanatory Variable
AUSTWI AUSRATE USTWI USRATE DMTWI DMRATE
AUSTWI 1 −.1674 −.168 −.0362 .1421 −.0219
AUSRATE   1 .0391 −.0078 −.0059 −.0315
USTWI     1 .4160 −.7882 .0065
USRATE       1 −.2009 .0515
DMTWI         1 −.0749
DMRATE           1
Table A5
Variance Decomposition for AUSTWI: Pre-Float
Days
Ahead		 Forecast
Variance		 Per Cent Due to Innovations in AUSTWI
ROWTWI
Foreign AUSTWI AUSRATE
0 .22 2.3 97.7 – 1.53
1 .40 3.5 96.4 .1 1.50
2 .60 4.6 93.9 1.6 1.51
3 .78 5.4 92.2 2.4 1.49
4 .89 6.4 91.1 2.5 1.44
5 1.00 7.2 90.1 2.7 1.40
6 1.09 8.1 88.9 3.0 1.37
7 1.17 8.9 87.5 3.6 1.34
8 1.27 9.6 86.0 4.4 1.33
9 1.36 10.4 84.1 5.5 1.31
10 1.46 11.0 82.1 6.9 1.31
15 1.94 14.1 70.1 15.8 1.30
20 2.47 16.5 58.7 24.8 1.33
30 3.52 19.4 44.0 36.6 1.41
Table A6
Variance Decomposition for AUSTWI: Post-Float
Days
Ahead		 Forecast
Variance		 Per Cent Due to Innovations in AUSTWI
ROWTWI
Foreign AUSTWI AUSRATE
0 .76 2.9 97.1 – 2.31
1 1.39 6.7 93.0 .3 2.15
2 1.93 6.9 92.8 .3 2.07
3 2.43 7.0 92.7 .3 2.02
4 2.88 7.2 92.5 .3 1.99
5 3.29 7.6 92.2 .2 1.96
6 3.67 8.0 91.8 .2 1.94
7 4.02 8.4 91.3 .3 1.91
8 4.34 9.1 90.6 .3 1.90
9 4.64 9.6 89.9 .5 1.87
10 4.93 10.3 89.0 .7 1.86
15 6.18 13.9 83.3 2.8 1.80
20 7.30 16.9 76.3 6.8 1.77
30 9.56 20.5 62.3 17.2 1.75
Table A7
Variance Decomposition for AUSRATE: Pre-Float
Days
Ahead		 Forecast
Variance		 Per Cent Due to Innovations in AUSTWI
ROWTWI
Foreign AUSTWI AUSRATE
0 .09 .7 22.1 77.2 2.23
1 .21 1.1 16.8 82.1 2.51
2 .35 2.7 15.5 81.8 2.60
3 .50 3.7 15.2 81.1 2.69
4 .69 4.8 15.5 79.7 2.84
5 .89 5.5 15.8 78.7 2.98
6 1.08 6.1 15.8 78.1 3.08
7 1.27 6.5 15.8 77.7 3.16
8 1.45 7.8 15.7 77.5 3.20
9 1.61 8.2 15.5 77.3 3.25
10 1.76 8.5 15.3 77.2 3.26
15 2.31 8.8 14.4 76.8 3.22
20 2.60 9.9 13.6 76.5 3.09
30 2.90 11.8 12.5 75.7 2.84
Table A8
Variance Decomposition for AUSRATE: Post-Float
Days
Ahead		 Forecast
Variance		 Per Cent Due to Innovations in AUSTWI
ROWTWI
Foreign AUSTWI AUSRATE
0 .03 .4 2.7 96.9 2.35
1 .07 1.8 2.2 96.0 2.60
2 .10 2.0 2.2 95.8 2.70
3 .14 2.0 2.2 95.8 2.71
4 .17 1.9 2.3 95.8 2.70
5 .20 1.7 2.5 95.8 2.74
6 .23 1.7 2.6 95.7 2.71
7 .25 1.5 2.8 95.7 2.72
8 .28 1.4 3.0 95.6 2.70
9 .30 1.5 3.1 95.4 2.70
10 .33 1.4 3.3 95.3 2.71
15 .43 1.7 4.1 94.2 2.63
20 .51 1.4 4.9 92.7 2.59
30 .65 4.9 6.1 89.0 2.53
Table A9
Test that VAR Equation is a Random Walk
(Marginal Significance Levels)
  Pre-Float Post-Float
AUSTWI .0001 .0001
AUSRATE .0001 .0028

Footnote

The pre-float VAR has five lags and no time trend; the post-float VAR has two lags and a linear time trend. [*]