Macroeconomic News and the Euro/Dollar Exchange Rate
This paper investigates to what extent daily movements in the euro/dollar rate were driven by news about the macroeconomic situation in the USA and the euro area during the first two years of EMU. We examine whether market participants reacted to news in different ways depending on whether the news came from the USA or from the euro area, and whether the news was good or bad. Furthermore, we investigate whether traders' reaction to news has changed over time. We find that macroeconomic news has a statistically significant correlation with daily movements of the euro against the dollar. However, this relationship exhibits considerable time variation. There are indications of asymmetric response, but to different extents at different times. Our results also provide evidence that the market seemed to ignore good news and remain fixated on bad news from the euro area, as often claimed in market commentaries, but only for some time. Finally, we find evidence that the impact of macroeconomic news on the euro/dollar rate was stronger when news switches from good to bad or vice versa. Copyright Banca Monte dei Paschi di Siena SpA, 2003
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 32 (2003)
Issue (Month): 3 (November)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0391-5026|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0391-5026|
References listed on IDEAS
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.:
- Martin Eichenbaum & Charles Evans, 1992.
"Some empirical evidence on the effects of monetary policy shocks on exchange rates,"
Working Paper Series, Macroeconomic Issues
92-32, Federal Reserve Bank of Chicago.
- Martin Eichenbaum & Charles L. Evans, 1993. "Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates," NBER Working Papers 4271, National Bureau of Economic Research, Inc.
- DeGennaro, Ramon P. & Shrieves, Ronald E., 1997. "Public information releases, private information arrival and volatility in the foreign exchange market," Journal of Empirical Finance, Elsevier, vol. 4(4), pages 295-315, December.
- Clostermann, Jörg & Schnatz, Bernd, 2000. "The determinants of the euro-dollar exchange rate: synthetic fundamentals and a non-existing currency," Discussion Paper Series 1: Economic Studies 2000,02, Deutsche Bundesbank, Research Centre.
- Vincent Koen & Laurence Boone & Alain de Serres & Nicola Fuchs, 2001. "Tracking the Euro," OECD Economics Department Working Papers 298, OECD Publishing.
- Chinn, Menzie D & Alquist, Ron, 2000. "Tracking the Euro's Progress," International Finance, Wiley Blackwell, vol. 3(3), pages 357-73, November.
When requesting a correction, please mention this item's handle: RePEc:bla:ecnote:v:32:y:2003:i:3:p:371-398. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.