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The Impact of Macroeconomic News on the Euro-Dollar Exchange Rate

Listed author(s):
  • Alberto Caruso

This paper studies the effect of macroeconomic "news" (market now-cast errors related to the flow of data releases on macroeconomic fundamentals) on the daily USD/EUR exchange rate. I consider a large number of real-time macroeconomic announcements from both the US and the euro-zone, and the related market expectations as reported by Bloomberg. For the euro-zone I also study country level announcements for the four biggest economies (Germany, France, Italy, Spain). The results for the whole sample (1999-2012) show that both the "news" associated with euro-zone releases and those associated with US ones have a significant impact on the USD/EUR exchange rate. However, the effect of the euro-zone "news" has become larger since the 2008 crisis and it is now more sizeable than that of the US "news".

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/235612/3/2016-32-CARUSO-theimpact.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2016-32.

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Length: 41 p.
Date of creation: Sep 2016
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/235612
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  1. Barbara Rossi & Atsushi Inoue, 2012. "Out-of-Sample Forecast Tests Robust to the Choice of Window Size," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(3), pages 432-453, April.
  2. Domenico Ferraro & Ken Rogoff & Barbara Rossi, 2011. "Can Oil Prices Forecast Exchange Rates?," Working Papers 11-05, Duke University, Department of Economics.
  3. Simpson, Marc W. & Ramchander, Sanjay & Chaudhry, Mukesh, 2005. "The impact of macroeconomic surprises on spot and forward foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 693-718, September.
  4. Linda S. Goldberg & Christian Grisse, 2013. "Time Variation in Asset Price Responses to Macro Announcements," NBER Working Papers 19523, National Bureau of Economic Research, Inc.
  5. Matteo Barigozzi & Antonio M. Conti & Matteo Luciani, 2014. "Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 693-714, October.
  6. 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.
  7. Cagliesi, Gabriella & Della Bina, Antonio Carlo Francesco & Tivegna, Massimo, 2014. "Market response to news: rationality and conformism in an euro-dollar exchange rate model," Greenwich Papers in Political Economy 11195, University of Greenwich, Greenwich Political Economy Research Centre.
  8. Almeida, Alvaro & Goodhart, Charles & Payne, Richard, 1998. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 383-408, September.
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