 The relative size of exchange rate and interest rate responses to news: An empirical investigationAndrew Coleman and Ozer Karagedikli The North American Journal of Economics and Finance, 2012, vol. 23, issue 1, 1-19 Abstract: This paper examines the relative size of the effects of macroeconomic news on the spot exchange rate, and interest rate differentials (2- and 5-year swap rate differentials), and the synthetic forward exchange rate schedule, for the high-frequency New Zealand data. We find that the spot exchange rate and 5-year swap rates respond by a similar magnitude to monetary surprises, implying there is little response of the forward exchange rate to this type of news. In contrast, the spot exchange rate responds by nearly three times as much as 5-year interest rates to CPI and GDP surprises, implying that forward rates appreciate to higher than expected CPI or GDP news. This is in contrast to standard theoretical models and US evidence. Lastly, we show that exchange rates but not interest rates respond to current account news. The implications of these results for monetary policy are considered. Keywords: Forward exchange rate; Events study; New Zealand (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:23:y:2012:i:1:p:1-19 DOI: 10.1016/j.najef.2011.07.002 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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