The impact of macroeconomic announcements on real time foreign exchange rates in emerging markets

Fang Cai, Hyunsoo Joo and Zhiwei Zhang
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Fang Cai: https://www.federalreserve.gov/econres/fang-cai.htm

No 973, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. We find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to U.S. news in recent years. We also find that market sentiment could sway the impact of news on these currencies systematically, as good (bad) news seems to matter more when optimism (pessimism) prevails. Market uncertainty also interacts with macroeconomic news in a statistically significant way, but its role varies across currencies and news.

Keywords: Foreign exchange rates; Developing countries (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-cna, nep-ifn, nep-mac and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:973

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