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Emerging market exchange rates during quantitative tapering: The effect of US and domestic news

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  • Tamgac, Unay

Abstract

We analyze the impact of domestic and US-based news announcements of a large set of economic and policy-related fundamentals on the US dollar versus the Turkish lira exchange rate from 2013 to 2016. Since exchange rate behavior is closely related to political trust, we also incorporate the effect of domestic and global political uncertainty, using country indices based on Google search results. Contrary to previous findings, our results reveal that surprises related to the domestic economy have a greater effect on the exchange rate compared to surprises related to the US economy. Most important are the surprises related to domestic inflation and monetary policy, as well as foreign employment, while political uncertainty plays a minor role. There is also an asymmetry in the market response. Bad news about the US economy has more impact than good news, and good news about the domestic economy has more impact than bad news.

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  • Tamgac, Unay, 2021. "Emerging market exchange rates during quantitative tapering: The effect of US and domestic news," Research in International Business and Finance, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:riibaf:v:57:y:2021:i:c:s0275531921000143
    DOI: 10.1016/j.ribaf.2021.101393
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    More about this item

    Keywords

    Emerging economies; Exchange rates; Google searches; Macroeconomic news; Quantitative tapering; Turkey;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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