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Interrelations among cross-currency basis swap spreads: Pre-and post-crisis analysis

Ibhagui, Oyakhilome (2018): Interrelations among cross-currency basis swap spreads: Pre-and post-crisis analysis.

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Abstract

We examine the long-run relationships and short-run dynamic linkages among 9 major cross-currency swap spreads, emphasizing how crisis periods have impacted long-run relationships and short-run dynamics. Results show that the long-run relationships were slightly weakened after crisis, while the short-run linkages were generally strengthened. The influence of euro and swiss cross-currency swaps on other European cross-currency swaps generally increased after crisis; the swiss cross-currency swap became much more influential on all European cross-currency swaps. Our findings are robust to alternative reordering of variables in our 9-variable VAR system, computation of generalized impulse response functions and consideration of rolling variance decompositions.

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