Friday, April 26, 2013

Failing Upwards in R: Plotting Multivariate Time Series and '02-'08 Dollar Devaluation

My confusion with plotting in R originates from how many plotting methods exist. plot(), plot.xts(), plot.zoo(), ggplot(), and so on. Some problems:
  1. They take different formatting arguments in the plot() call. For example, plot.xts takes plot.xts(major.format="", minor.ticks="", ...) to format ticks on an axis. plot.zoo doesn't do it this way, and I still don't know how plot.zoo does it.
  2. plot.zoo plots multivariate time series on the same plot easily where plot.xts can't by using the plot.type="single". Here's what I can do so far,
    using plot.zoo:

    Labeling is a problem. Blue is pound, red is euro. Using plot.xts:


    Minor ticks in xts are easy to clean up, needless to say.
The series go from about 2000-'13. The '09 recession causes about an 18% drop in USD's to Euro. Before the crash, one euro bought about 1.6 dollars. After the crash, one euro bought about 1.3 dollars. The euro was made official currency of the Euro-zone in 1999 and it dropped to under $1 after inception. Since 2003, it's risen and stayed above $1. First glance, I'm having trouble understanding the rise from 2002-'08 in the exchange rate. The dollar depreciated and/or the euro+pound appreciated, even in a boom time in the US. This helps, but this is even better. The dynamic described in the latter goes like this:
Large US trade deficits -> excess dollars overseas -> can't/don't spend all USD in the US -> selling pressure on over-abundance of dollars


From that, devaluation. Set the start date in these charts from tradingeconomics to 2000 to see why you might not want to be in dollars (or more specifically, why you might have too many).

Source: tradingeconomics.com


Source: tradingeconomics.com









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