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The response of multinationals’ foreign exchange rate exposure to macroeconomic news

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We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms? foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.

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  • Kris Boudt & Christopher J. Neely & Piet Sercu & Marjan Wauters, 2017. "The response of multinationals’ foreign exchange rate exposure to macroeconomic news," Working Papers 2017-20, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2017-020
    DOI: 10.20955/wp/2017.020
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    Cited by:

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    2. Yi-Chen Chung & Hsien-Ming Chou & Chih-Neng Hung & Chihli Hung, 2021. "Using Textual and Economic Features to Predict the RMB Exchange Rate," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(6), pages 1-8.
    3. Sikarwar, Ekta, 2022. "Board attributes, hedging activities and exchange rate risk: Multi-country firm-level evidence," Economic Modelling, Elsevier, vol. 110(C).
    4. Sikarwar, Ekta, 2020. "Forex interventions and exchange rate exposure: Evidence from emerging market firms," Economic Modelling, Elsevier, vol. 93(C), pages 69-81.
    5. Munazza Jabeen & Abdul Rashid, 2022. "Macroeconomic News and Exchange Rates: Exploring the Role of Order Flow," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 222-245, May.
    6. Munazza Jabeen & Abdul Rashid & Hajra Ihsan, 2022. "The news effects on exchange rate returns and volatility: Evidence from Pakistan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 745-769, January.
    7. Yu Ma & Xinqian Du, 2022. "Exchange rate factors, income levels, and investment abroad: An empirical study based on a sample of emerging economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1711-1730, April.

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    More about this item

    Keywords

    Foreign exchange exposure; High-frequency data; Macro;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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