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How is Macro News Transmitted to Exchange Rates? (December 2003)

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Abstract

This paper tests whether macroeconomic news is transmitted to exchange rates via the transactions process and if so, what share occurs via transactions versus the traditional direct channel. We identify the link between order flow and macro news using a heteroskedasticity-based approach, a la Rigobon and Sack (2002). In both daily and intra-daily data, order flow varies considerably with macro news flow. At least half of the effect of macro news on exchange rates is transmitted via order flow.

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  • Martin D. D. Evans(Georgetown University and NBER) and Richard K. Lyons(U.C. Berkeley and NBER, Haas School of Business), 2005. "How is Macro News Transmitted to Exchange Rates? (December 2003)," Working Papers gueconwpa~05-05-05, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~05-05-05
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    2. Smita Roy Trivedi, 2022. "The Janus view: Do market participants looking into the past impact foreign exchange volatility?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 3990-4001, October.

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