The Impact of News in the Dollar/Deutschmark Exchange Rate: Evidence from the 1990s
AbstractIn this paper I analyze three specifications of spot exchange rate models by using an alternative approach in defining the news variable. In particular, I employ quarterly data of the U.S. dollar/German Mark exchange rate for the period 1991-1998 in order to determine whether the effect of news announcements on the exchange rate is still present in the decade of the 1990s. The empirical evidence suggests that news do not seem to provide explanatory power for justifying deviations from either the efficient markets hypothesis or the uncovered interest rate parity. Nevertheless, newspaper announcements and news about inflation do contribute to significantly explain short run departures from purchasing power parity (PPP) with the expected sign, supporting the view that deviations from PPP will arise from new information available in the market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0422.
Date of creation: Dec 2004
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karfakis, Costas & Kim, Suk-Joong, 1995.
"Exchange rates, interest rates and current account news: some evidence from Australia,"
Journal of International Money and Finance,
Elsevier, vol. 14(4), pages 575-595, August.
- Karfakis, C. & Kim, Suk-Joong, 1993. "Exchange Rates, Interest Rates and Current Account News: Some Evidence from Australia," Working Papers 189, University of Sydney, School of Economics.
- Cavaglia, Stefano M. F. G. & Wolff, Christian C. P., 1996. "A note on the determinants of unexpected exchange rate movements," Journal of Banking & Finance, Elsevier, vol. 20(1), pages 179-188, January.
- Edison, Hali J, 1997.
"The Reaction of Exchange Rates and Interest Rates to News Releases,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 2(2), pages 87-100, April.
- Hali J. Edison, 1996. "The reaction of exchange rates and interest rates to news releases," International Finance Discussion Papers 570, Board of Governors of the Federal Reserve System (U.S.).
- Hogan, Ked & Melvin, Michael & Roberts, Dan J., 1991. "Trade balance news and exchange rates: Is there a policy signal?," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages S90-S99, March.
- Hardouvelis, Gikas A., 1988. "Economic news, exchange rates and interest rates," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 23-35, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sue Mialon).
If references are entirely missing, you can add them using this form.