Synchronization analysis between exchange rates on the basis of purchasing power parity using the Hilbert transform

Synchronization is a phenomenon in which a pair of fluctuations adjusts their rhythms when interacting with each other. We measure the degree of synchronization between the U.S. dollar (USD) and euro exchange rates and between the USD and Japanese yen exchange rates based on purchasing power parity (PPP) over time. We employ a method of synchronization analysis using the Hilbert transform and find that the degree of synchronization is high most of the time, which suggests the establishment of PPP. The degree of synchronization does not remain high across periods with asymmetric economic events such as the U.S. real estate bubble.