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The response of multinationals’ foreign exchange rate exposure to macroeconomic news

Author

Listed:
  • Boudt, Kris

    () (Vrije Universiteit Brussel and Vrije Universiteit Amsterdam)

  • Neely, Christopher J.

    () (Federal Reserve Bank of St. Louis)

  • Sercu, Piet

    () (KU Leuven)

  • Wauters, Marjan

    () (Vrije Universiteit Brussel and KU Leuven)

Abstract

We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms’ foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.

Suggested Citation

  • Boudt, Kris & Neely, Christopher J. & Sercu, Piet & Wauters, Marjan, 2017. "The response of multinationals’ foreign exchange rate exposure to macroeconomic news," Working Papers 2017-20, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2017-020
    DOI: 10.20955/wp/2017.020
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    References listed on IDEAS

    as
    1. Jérôme Lahaye & Sébastien Laurent & Christopher J. Neely, 2011. "Jumps, cojumps and macro announcements," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 893-921, September.
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    More about this item

    Keywords

    Foreign exchange exposure; High-frequency data; Macro;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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