IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v31y1999i12p1511-1521.html
   My bibliography  Save this article

Do macro-economic news announcements affect the volatility of foreign exchange rates? Some evidence from Australia

Author

Listed:
  • Suk-Joong Kim

Abstract

This paper investigates the role of Australian macro-economic announcement news on five major Australian dollar (AUD) exchange rates. Specifically, the daily changes of the exchange rates are modelled to ascertain the existence and the nature of the news effects in the conditional mean and variance of the changes. It is found that a higher than expected current account deficit and unemployment rate announcements depreciated the AUD, and an unexpectedly higher GDP growth announcement appreciated it. Current account deficit, CPI and unemployment news announcements significantly raised the conditional volatility of the changes of the AUD on the days of their announcements, except for the BP/AUD for the CPI news, and there is some evidence of retail sales news reducing it. In general, the evidence is consistent with a view that a release of new information creates uncertainty in the markets due to a lack of consensus on the effects of the particular news announcement and the necessary course of action. In addition, the EGARCH(1,1)-in-Mean modelling of the daily changes of the exchange rates is found to be very successful in addressing the observed statistical properties of the daily changes: leptokurtosis, time-varying heteroscedasticity and asymmetric response of the conditional volatility to unexpected changes.

Suggested Citation

  • Suk-Joong Kim, 1999. "Do macro-economic news announcements affect the volatility of foreign exchange rates? Some evidence from Australia," Applied Economics, Taylor & Francis Journals, vol. 31(12), pages 1511-1521.
  • Handle: RePEc:taf:applec:v:31:y:1999:i:12:p:1511-1521 DOI: 10.1080/000368499323030
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/000368499323030
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, pages 97-114.
    2. Hafer, R W & Kutan, A M, 1997. "More Evidence on the Money-Output Relationship," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 48-58, January.
    3. Sims, Christopher A, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," American Economic Review, American Economic Association, pages 250-257.
    4. Glosten, L. R. & Jagannathan, R., 1994. "A contingent claim approach to performance evaluation," Journal of Empirical Finance, Elsevier, pages 133-160.
    5. Davis, Mark S. & Tanner, J. Ernest, 1997. "Money and economic activity revisited," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 955-968, December.
    6. Thornton, Daniel L & Batten, Dallas S, 1985. "Lag-Length Selection and Tests of Granger Causality between Money and Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 164-178, May.
    7. Christiano, Lawrence J. & Ljungqvist, Lars, 1988. "Money does Granger-cause output in the bivariate money-output relation," Journal of Monetary Economics, Elsevier, pages 217-235.
    8. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    9. Dufour, Jean-Marie & Tessier, David, 1993. "On the relationship between impulse response analysis, innovation accounting and Granger causality," Economics Letters, Elsevier, vol. 42(4), pages 327-333.
    10. James H. Stock & Mark W. Watson, 1987. "Interpreting Evidence on Money-Income Causality," NBER Working Papers 2228, National Bureau of Economic Research, Inc.
    11. Robert B. Litterman, 1983. "A random walk, Markov model for the distribution of time series," Staff Report 84, Federal Reserve Bank of Minneapolis.
    12. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, pages 372-375.
    13. Litterman, Robert B, 1983. "A Random Walk, Markov Model for the Distribution of Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 169-173, April.
    14. Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, pages 161-181.
    15. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    16. Krol, Robert & Ohanian, Lee E., 1990. "The impact of stochastic and deterministic trends on money-output causality : A multi-country investigation," Journal of Econometrics, Elsevier, pages 291-308.
    17. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
    18. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, pages 540-552.
    19. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
    20. King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, pages 363-380.
    21. Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, pages 279-306.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ehrmann, Michael & Osbat, Chiara & Stráský, Jan & Uusküla, Lenno, 2014. "The euro exchange rate during the European sovereign debt crisis – Dancing to its own tune?," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 319-339.
    2. Christopher J. Neely, 2011. "A survey of announcement effects on foreign exchange volatility and jumps," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 361-385.
    3. Kim, Suk-Joong & Kortian, Tro & Sheen, Jeffrey, 2000. "Central bank intervention and exchange rate volatility -- Australian evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 381-405, December.
    4. Wan, Jer-Yuh & Kao, Chung-Wei, 2008. "The euro and pound volatility dynamics: An investigation from conditional jump process," Research in International Business and Finance, Elsevier, pages 193-207.
    5. Kim, Suk-Joong & Sheen, Jeffrey, 2006. "Interventions in the Yen-dollar spot market: A story of price, volatility and volume," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3191-3214, November.
    6. Ozge Akinci & Olcay Yucel Culha & Umit Ozlale & Gulbin Sahinbeyoğlu, 2006. "The effectiveness of foreign exchange interventions under a floating exchange rate regime for the Turkish economy: a post-crisis period analysis," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1371-1388.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:31:y:1999:i:12:p:1511-1521. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    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.

    We have no references for this item. You can help adding them by using 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.