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Large changes in major exchange rates: a chronicle of the 1990s

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  • B. J. Lobo
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    Abstract

    In the continuing effort to understand exchange rate changes, this article chronicles and analyses, for the first time, the proximate reasons for large daily movements in four leading US dollar exchange rates in the 1990s. A sample of 111 events highlights the importance of expectations and the role of subtle political influences on currency markets. While 19% of all events studied had mainly economic reasons, over 60% of all events could be partly or wholly attributed to political factors. Events related to monetary policy changes were the most significant economic factor, while intervention activity and war/coup attempts were the most significant political factors. This research indicates that large changes in the Japanese yen were caused mostly by the political dynamics of the bilateral trade balance, while big moves in the German mark and British pound stemmed mainly from European politico-economic events. The enigmatic Canadian dollar was driven by domestic politics related to the Quebec secession issue.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 12 (2002)
    Issue (Month): 11 ()
    Pages: 805-811

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    Handle: RePEc:taf:apfiec:v:12:y:2002:i:11:p:805-811

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    Cited by:
    1. Nikolaos Antonakakis, 2012. "Exchange Return Co-movements and Volatility Spillovers Before and After the Introduction of Euro," FIW Working Paper series 080, FIW.
    2. Schepp, Zoltán, 2003. "Befektetői horizont és a „forwardrejtély”
      [The investor horizon and the ‘forward puzzle’]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 939-963.
    3. Farooq Malik & Syed Hassan, 2004. "Modeling volatility in sector index returns with GARCH models using an iterated algorithm," Journal of Economics and Finance, Springer, vol. 28(2), pages 211-225, June.

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