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Author: Walid Ben Omrane
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
We examine the state-dependent volatility reaction to macroeconomic news in the euro-dollar, pound-dollar and yen-dollar markets between 2005 and 2009. Unlike the traditional event studies that define economic states based on exogenously determined thresholds, we employ the smooth transition regression model, which allows for the possibility of a gradual as well as an instantaneous regime change. Our results suggest that, on average, for about 40 percent of the major news indicators, the volatility reaction to macroeconomic news is larger in expansions compared to the recession period in the three currency markets. Non-farm payroll employment, GDP advance release, retail sales, trade deficit and CPI announcements are consistently associated with larger volatility response in expansions. New home sales and the Fed funds rate announcements, on the other hand, generate larger market reactions in the recession period. We attribute the pattern associated with new home sales and the Fed funds rate to the unique role the real estate and credit markets played in the 2008 recession. We show that different types of macroeconomic news indicators generate different shapes of transition functions. Specifically, the estimated transition function based on the housing starts data indicates a more gradual regime change compared to other indicators.
Author: Walid Ben Omrane
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
We examine the state-dependent volatility reaction to macroeconomic news in the euro-dollar, pound-dollar and yen-dollar markets between 2005 and 2009. Unlike the traditional event studies that define economic states based on exogenously determined thresholds, we employ the smooth transition regression model, which allows for the possibility of a gradual as well as an instantaneous regime change. Our results suggest that, on average, for about 40 percent of the major news indicators, the volatility reaction to macroeconomic news is larger in expansions compared to the recession period in the three currency markets. Non-farm payroll employment, GDP advance release, retail sales, trade deficit and CPI announcements are consistently associated with larger volatility response in expansions. New home sales and the Fed funds rate announcements, on the other hand, generate larger market reactions in the recession period. We attribute the pattern associated with new home sales and the Fed funds rate to the unique role the real estate and credit markets played in the 2008 recession. We show that different types of macroeconomic news indicators generate different shapes of transition functions. Specifically, the estimated transition function based on the housing starts data indicates a more gradual regime change compared to other indicators.
Author: Helinä Laakkonen
Publisher:
ISBN: 9789524621700
Category : Foreign exchange rates
Languages : en
Pages : 41
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Book Description
Tiivistelmä: Makrouutisten vaikutus valuuttakurssin volatiliteettiin.
Author: Walid Ben Omrane
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
This paper addresses the central open issue in exchange rate economics: the link between exchange rate volatility and economic fundamentals. In the framework of a multivariate volatility model that allows for volatility spillover, we develop a new impulse response analysis to estimate and decompose the simultaneous effect of macroeconomic news surprises on the foreign exchange volatility. We show that news announcement effects include two components; a direct and an indirect effect induced by volatility spillover. We show that more than 50% of the total accumulated news effect on the Pound and the Yen are due to volatility transmission from the two major currencies and mainly from the Euro.
Author: Torben Gustav Andersen
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 54
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Book Description
Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomic expectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and the Euro. In particular, we find that announcement surprises (that is, divergences between expectations and realizations, or 'news') produce conditional mean jumps; hence high-frequency exchange rate dynamics are linked to fundamentals. The details of the linkage are intriguing and include announcement timing and sign effects. The sign effect refers to the fact that the market reacts to news in an asymmetric fashion: bad news has greater impact than good news, which we relate to recent theoretical work on information processing and price discovery.
Author: Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico
Publisher:
ISBN: 9789291319626
Category : Banks and banking, Central
Languages : es
Pages : 0
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Book Description
Author: Johannes W. Fedderke
Publisher:
ISBN:
Category : Current events
Languages : en
Pages : 15
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Book Description
"Economic theory in the context of floating exchange rates has focussed on underlying medium and long term direction of exchange rate movements. Daily volatility is less well understood. One theory that offers an explanation for short term exchange rate movements is that of the efficient market hypothesis or EMH. Its application to the forex market allows exchange rate movements to be understood as the reaction of traders to relevant news. In an efficient market traders react to news and specifically to surprise news events which necessitate a re-evaluation of the currency value. We test for the validity of this hypothesis in the context of the daily rand/dollar forex market over a three year period, adding an emerging market case to the literature. We test the significance of macroeconomic news surprises -measured by the difference between actual and forecast data - in driving daily exchange rates. We find that surprises in both real and nominal variables cause a statistically significant reaction in the exchange rate. The results support an asymmetry between news of different origin as only surprises that originate in the U.S. prove significant. Good news also seems to receive greater attention from traders than bad news in our sample. Finally, we find that the statistical significance of variables is time-varying"--Publisher's website.
Author: Andreas Grün
Publisher: Grin Publishing
ISBN: 9783656004080
Category :
Languages : en
Pages : 48
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Book Description
Seminar paper from the year 2007 in the subject Economics - Finance, grade: 1,0, Otto Beisheim School of Management Vallendar, course: Seminar in International Finance, language: English, abstract: The overall aim of this paper is first to review existing papers and based on this to conduct own research in the field of the effect of macroeconomic news in general and, more specific, ECB communication on exchange rates. Exchange rate communication is a special form of macroeconomic news that is issued by central banks. Existing research on the effect of this communication has lead to often diverging result that illustrate the high intensity and dynamics of the current academic debate with regard to this matter. On one hand evidence of a relatively high impact on the mean and volatility of currency markets is found (e.g. by Fratzscher (2004)) whereas others (e.g. Jansen, de Haan (2005)) do not chronicle statistically significant and persistent results. The difficulty of understanding the response of currency markets becomes even harder when the significance of the respective context of news e.g. day of the week effect is considered or asymmetric responses are taken into account. Among the group of central banks especially the European Central Bank has attracted high attention in academic research. Preceding studies generally create dummy variables to measure ECB communication. These variables are then by different methods regressed against the exchange rate or other financial assets in order to find explanatory relationships. This paper follows this approach by using the dummy variable of Rosa, Verga (2006). Ultimately we arrive at three major findings using our dataset. (a) Communication and interest changes by central banks are interpreted differently by currency markets: While communication that suggests raising interest rates seems to b
Author: Roman Horvath
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We examine the effects of the Czech National Bank communication, macroeconomic news and interest rate differential on exchange rate volatility using generalized autoregressive conditional heteroscedasticity model. Our results suggest that central bank communication has a calming effect on exchange rate volatility. The timing of central bank communication seems to matter, too, as financial markets respond more to the communication before the policy meetings than after them. Next, macroeconomic news releases are found to reduce exchange rate volatility, while interest rate differential seems to increase it.
Author: Charles Engel
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 48
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Book Description
Standard models of exchange rates, based on macroeconomic variables such as prices, interest rates, output, etc., are thought by many researchers to have failed empirically. We present evidence to the contrary. First, we emphasize the point that "beating a random walk" in forecasting is too strong a criterion for accepting an exchange rate model. Typically models should have low forecasting power of this type. We then propose a number of alternative ways to evaluate models. We examine in-sample fit, but emphasize the importance of the monetary policy rule, and its effects on expectations, in determining exchange rates. Next we present evidence that exchange rates incorporate news about future macroeconomic fundamentals, as the models imply. We demonstrate that the models might well be able to account for observed exchange-rate volatility. We discuss studies that examine the response of exchange rates to announcements of economic data. Then we present estimates of exchange-rate models in which expected present values of fundamentals are calculated from survey forecasts. Finally, we show that out-of-sample forecasting power of models can be increased by focusing on panel estimation and long-horizon forecasts.
Author: Richard Payne
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper studies the high frequency reaction of the DEM/USD exchange rate to publicly announced macroeconomic information emanating from Germany and the U.S. By using data sampled at a five-minute frequency, we are able to identify significant impacts of most announcements on the exchange rate change in the 15 minutes post-announcement, although the significance of these effects decreases rapidly as the interval over which the post-announcement change in exchange rates is increased. The direction of the exchange rate response conforms, in general, with a reaction function interpretation whereby reactions to macroeconomic news are driven by the likely operations of monetary authorities in domestic money markets. Further, we detect influences of German monetary policy decisions on the reaction of the exchange rate, and also differences between U.S. and German announcements in the exchange rate reaction time pattern.
