The impact of macroeconomic announcements on real time foreign exchange rates in emerging markets
AbstractThis paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. We find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to U.S. news in recent years. We also find that market sentiment could sway the impact of news on these currencies systematically, as good (bad) news seems to matter more when optimism (pessimism) prevails. Market uncertainty also interacts with macroeconomic news in a statistically significant way, but its role varies across currencies and news.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 973.
Date of creation: 2009
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-17 (All new papers)
- NEP-CBA-2009-07-17 (Central Banking)
- NEP-CNA-2009-07-17 (China)
- NEP-IFN-2009-07-17 (International Finance)
- NEP-MAC-2009-07-17 (Macroeconomics)
- NEP-MST-2009-07-17 (Market Microstructure)
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- Nowak, Sylwia & Andritzky, Jochen & Jobst, Andreas & Tamirisa, Natalia, 2011. "Macroeconomic fundamentals, price discovery, and volatility dynamics in emerging bond markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2584-2597, October.
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