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Does the Currency Board Matter? U.S. News and Argentine Financial Market Reaction

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Author Info

  • Bernd Hayo

    ()
    (Philipps-University Marburg)

  • Matthias Neuenkirch

    ()
    (Philipps-University Marburg)

Abstract

Using a GARCH model, we study the effects of U.S. monetary policy and macroeconomic announcements on Argentine money, stock, and foreign exchange markets over the period January 1998 to July 2007. We show, first, that both types of news have a significant impact on all markets. Second, there are noticeable differences in reaction for different subsamples: Argentine money markets were more dependent on U.S. news under the currency board than after it was abandoned as the floating exchange rate partly absorbs spillover effects from the United States. Finally, we find that U.S.-dollar-denominated assets react less to U.S. news than peso-denominated assets, which suggests that the currency board was not completely credible during its final years.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/23-2008hayo.pdf
File Function: Sixth version, 2011
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200823.

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Length: 17 pages
Date of creation: 2008
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200823

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Related research

Keywords: Argentina; Financial Markets; Monetary Policy; Federal Reserve Bank; Central Bank Communication; Macroeconomic Announcements;

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Cited by:
  1. Bernd Hayo & Ali M. Kutan & Matthias Neuenkirch, 2012. "Federal Reserve Communications and Emerging Equity Markets," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 1041-1056, January.
  2. Christopher J. Neely & S. Rubun Dey, 2010. "A survey of announcement effects on foreign exchange returns," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 417-464.
  3. Andrea Vaona, 2013. "Countervailing inequality effects of globalization and renewable energy generation in Argentina," Working Papers 12/2013, University of Verona, Department of Economics.

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