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Cross-country hierarchical structure and currency crisis

Guillermo J. Ortega, David Matesanz

physics.data-anarXiv:physics/0508188

Abstract

Using data from a sample of 28 representatives countries, we propose a classification of currency crises consequences based on the ultrametric analysis of the real exchange rate movements time series, without any further assumption. By using the matrix of synchronous linear correlation coefficients and the appropriate metric distance between pairs of countries, we were able to construct a hierarchical tree of countries. This economic taxonomy provides relevant information regarding liaisons between countries and a meaningful insight about the contagion phenomenon

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