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The impact of macro news and central bank communication on emerging European forex markets

Author

Listed:
  • Balázs Égert

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Evžen Kočenda

Abstract

We employ a two-stage empirical strategy to analyze the impact of macroeconomic news and central bank communication on the exchange rates of three Central and Eastern European (CEE) currencies against the euro. First we estimate the nominal equilibrium exchange rate based on a monetary model. Second, we employ a high-frequency GARCH model to estimate the effects of the news and communication along with the estimated exchange rate misalignment on the exchange rate as well as its volatility. The analysis is performed during the pre-crisis (2004-2007) and crisis (2008-2009) periods. CEE currencies react to macroeconomic news during both periods in an intuitive manner that corresponds to exchange rate-related theories. However, the responsiveness of the currencies to central bank verbal interventions becomes important only during the crisis period.

Suggested Citation

  • Balázs Égert & Evžen Kočenda, 2014. "The impact of macro news and central bank communication on emerging European forex markets," Post-Print hal-01385932, HAL.
    • Handle: RePEc:hal:journl:hal-01385932
    DOI: 10.1016/j.ecosys.2013.01.004
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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