IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_5748.html
   My bibliography  Save this paper

Macro News and Exchange Rates in the BRICS

Author

Listed:
  • Guglielmo Maria Caporale
  • Fabio Spagnolo
  • Nicola Spagnolo

Abstract

This paper examines the effects of newspaper headlines on the exchange rates visa-a-vis both the US dollar and the euro for the currencies of the BRICS (Brazil, Russia, India, China and South Africa). The data are daily and cover the period 03/1/2000-12/5/2013. The estimated VAR-GARCH(1,1) model allows for both mean and volatility spillovers and for the possible impact of the recent financial crisis as well. The results differ across countries, but provide in a number of cases evidence of significant spillovers, whose strength appears to have increased during the crisis. Further, given the increasingly global role of these countries, their FX markets have become more responsive to foreign news.

Suggested Citation

  • Guglielmo Maria Caporale & Fabio Spagnolo & Nicola Spagnolo, 2016. "Macro News and Exchange Rates in the BRICS," CESifo Working Paper Series 5748, CESifo.
    • Handle: RePEc:ces:ceswps:_5748
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp5748.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Égert, Balázs & Kočenda, Evžen, 2014. "The impact of macro news and central bank communication on emerging European forex markets," Economic Systems, Elsevier, vol. 38(1), pages 73-88.
    2. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(1), pages 122-150, February.
    3. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, vol. 62(3), pages 1139-1168, June.
    4. Gabriele Galati & Corrinne Ho, 2001. "Macroeconomic news and the euro/dollar exchange rate," BIS Working Papers 105, Bank for International Settlements.
    5. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November.
    6. Birz, Gene & Lott Jr., John R., 2011. "The effect of macroeconomic news on stock returns: New evidence from newspaper coverage," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2791-2800, November.
    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. Naeem, Muhammad Abubakr & Yousaf, Imran & Karim, Sitara & Yarovaya, Larisa & Ali, Shoaib, 2023. "Tail-event driven NETwork dependence in emerging markets," Emerging Markets Review, Elsevier, vol. 55(C).
    2. 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).
    3. Caporale, Guglielmo Maria & Menla Ali, Faek & Spagnolo, Fabio & Spagnolo, Nicola, 2022. "Cross-border portfolio flows and news media coverage," Journal of International Money and Finance, Elsevier, vol. 126(C).
    4. Svatopluk Kapounek & Zuzana Kučerová & Evžen Kočenda, 2022. "Selective Attention in Exchange Rate Forecasting," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 23(2), pages 210-229, May.
    5. Ekinci, Cumhur & Akyildirim, Erdinc & Corbet, Shaen, 2019. "Analysing the dynamic influence of US macroeconomic news releases on Turkish stock markets," Finance Research Letters, Elsevier, vol. 31(C), pages 155-164.
    6. Rognone, Lavinia & Hyde, Stuart & Zhang, S. Sarah, 2020. "News sentiment in the cryptocurrency market: An empirical comparison with Forex," International Review of Financial Analysis, Elsevier, vol. 69(C).
    7. Kočenda, Evžen & Moravcová, Michala, 2018. "Intraday effect of news on emerging European forex markets: An event study analysis," Economic Systems, Elsevier, vol. 42(4), pages 597-615.
    8. Gkillas, Konstantinos & Konstantatos, Christoforos & Tsagkanos, Athanasios & Siriopoulos, Costas, 2021. "Do economic news releases affect tail risk? Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 40(C).
    9. Demir, Ender & Ersan, Oguz, 2017. "Economic policy uncertainty and cash holdings: Evidence from BRIC countries," Emerging Markets Review, Elsevier, vol. 33(C), pages 189-200.
    10. Ur Rehman, Mobeen & Al Rababa'a, Abdel Razzaq & El-Nader, Ghaith & Alkhataybeh, Ahmad & Vo, Xuan Vinh, 2022. "Modelling the quantile cross-coherence between exchange rates: Does the COVID-19 pandemic change the interlinkage structure?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    11. Yin, Libo, 2020. "Can the intermediary capital risk predict foreign exchange rates?," Finance Research Letters, Elsevier, vol. 37(C).
    12. Jolanta Pasionek, 2020. "Countries of BRICS group on Forex market," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 19(1), pages 99-117, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caporale, Guglielmo Maria & Spagnolo, Fabio & Spagnolo, Nicola, 2018. "Exchange rates and macro news in emerging markets," Research in International Business and Finance, Elsevier, vol. 46(C), pages 516-527.
    2. Caporale, Guglielmo Maria & Spagnolo, Fabio & Spagnolo, Nicola, 2016. "Macro news and stock returns in the Euro area: A VAR-GARCH-in-mean analysis," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 180-188.
    3. Scott R. Baker & Nicholas Bloom & Steven J. Davis & Marco C. Sammon, 2021. "What Triggers Stock Market Jumps?," NBER Working Papers 28687, National Bureau of Economic Research, Inc.
    4. Guglielmo Maria Caporale & Fabio Spagnolo & Nicola Spagnolo, 2017. "Macro News and Commodity Returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 68-80, January.
    5. Tarciso Gouveia da Silva & Osmani Teixeira de Carvalho Guillén & George Augusto Noronha Morcerf & Andre de Melo Modenesi, 2020. "Effects of Monetary Policy News on Financial Assets: evidence from Brazil on a bivariate VAR-GARCH model (2006-17)," Working Papers Series 536, Central Bank of Brazil, Research Department.
    6. Al-Maadid, Alanoud & Caporale, Guglielmo Maria & Spagnolo, Fabio & Spagnolo, Nicola, 2020. "The impact of business and political news on the GCC stock markets," Research in International Business and Finance, Elsevier, vol. 52(C).
    7. Mun, Kyung-Chun, 2012. "The joint response of stock and foreign exchange markets to macroeconomic surprises: Using US and Japanese data," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 383-394.
    8. da Silva, Tarciso Gouveia & de Carvalho Guillén, Osmani Teixeira & Morcerf, George Augusto Noronha & de Melo Modenesi, Andre, 2022. "Effects of monetary policy news on financial assets: Evidence from Brazil on a bivariate VAR-GARCH model (2006–17)," Emerging Markets Review, Elsevier, vol. 52(C).
    9. Muhammad Ateeq ur REHMAN & Furman ALI & Shang XIE, 2022. "Impact of Foreign Investment News on the Return, Cost of Equity and Cash Flow Activities," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 112-127, December.
    10. Marlene Amstad & Leonardo Gambacorta & Chao He & Dora Xia, 2021. "Trade sentiment and the stock market: new evidence based on big data textual analysis of Chinese media," BIS Working Papers 917, Bank for International Settlements.
    11. Laura Wallenius & Elena Fedorova & Sheraz Ahmed & Mikael Collan, 2017. "Surprise Effect of Euro Area Macroeconomic Announcements on CIVETS Stock Markets," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(1), pages 55-71.
    12. Mikael Apel & Marianna Blix Grimaldi & Isaiah Hull, 2022. "How Much Information Do Monetary Policy Committees Disclose? Evidence from the FOMC's Minutes and Transcripts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1459-1490, August.
    13. GOK, Ibrahim Yasar & TOPUZ, Sefa, 2016. "The Impact Of The Domestic And Foreign Macroeconomic News Announcements On The Turkish Stock Market," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 20(3), pages 95-107.
    14. Gene Birz & Sandip Dutta, 2016. "U.S. Macroeconomic News and International Stock Prices: Evidence from Newspaper Coverage," Accounting and Finance Research, Sciedu Press, vol. 5(1), pages 247-247, February.
    15. Demirovic, Amer & Guermat, Cherif & Tucker, Jon, 2017. "The relationship between equity and bond returns: An empirical investigation," Journal of Financial Markets, Elsevier, vol. 35(C), pages 47-64.
    16. Gabriele Ranco & Darko Aleksovski & Guido Caldarelli & Miha Grčar & Igor Mozetič, 2015. "The Effects of Twitter Sentiment on Stock Price Returns," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-21, September.
    17. Maria Ogneva, 2013. "Discussion of What Do Management Earnings Forecasts Convey About the Macroeconomy?," Journal of Accounting Research, Wiley Blackwell, vol. 51(2), pages 267-279, May.
    18. Chin, Chang-Chiang & Paphakin, Warinthorn, 2021. "The daily relationship between U.S. asset prices and stock prices of American countries," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    19. Gabriele Ranco & Ilaria Bordino & Giacomo Bormetti & Guido Caldarelli & Fabrizio Lillo & Michele Treccani, 2014. "Coupling news sentiment with web browsing data improves prediction of intra-day price dynamics," Papers 1412.3948, arXiv.org, revised Dec 2015.
    20. Se-Hyeon Han, 2023. "A Pilot Study to Assess the Effects of News Coverage Articles about Security Incidents on Stock Prices in Korea," JRFM, MDPI, vol. 16(10), pages 1-21, September.

    More about this item

    Keywords

    BRICS; exchange rates; GARCH model; macro news;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    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:ces:ceswps:_5748. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.