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How is Macro News Transmitted to Exchange Rates? (December 2003)

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Abstract

This paper tests whether macroeconomic news is transmitted to exchange rates via the transactions process and if so, what share occurs via transactions versus the traditional direct channel. We identify the link between order flow and macro news using a heteroskedasticity-based approach, a la Rigobon and Sack (2002). In both daily and intra-daily data, order flow varies considerably with macro news flow. At least half of the effect of macro news on exchange rates is transmitted via order flow. Classification-JEL Codes:

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Bibliographic Info

Paper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~05-05-05.

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Date of creation: 05 May 2005
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Handle: RePEc:geo:guwopa:gueconwpa~05-05-05

Contact details of provider:
Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Phone: 202-687-6074
Fax: 202-687-6102
Email:
Web page: http://econ.georgetown.edu/

Order Information:
Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
Email:
Web: http://econ.georgetown.edu/

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Cited by:
  1. Siklos, Pierre & Bohl , Martin, 2006. "Policy words and policy deeds: the ECB and the euro," Research Discussion Papers 2/2006, Bank of Finland.

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