Macroeconomic news surprises and volatility spillover in foreign exchange markets

Walid Ben Omrane and Christian Hafner

Empirical Economics, 2015, vol. 48, issue 2, 577-607

Abstract: This paper examines the link between exchange rate volatility and economic fundamentals. In the framework of a multivariate volatility model that allows volatility spillover, we develop a new impulse response analysis to estimate and decompose the simultaneous effect of macroeconomic news surprises on the foreign exchange volatility. We show that news announcement effects include two components: a direct and an indirect effect induced by volatility spillover. We show that more than 50 % of the total accumulated news effect on the Pound and the Yen is due to volatility transmission from the two major currencies and mainly from the Euro. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Foreign exchange markets; Volatility spillover; News surprises; Impulse response analysis; F31; F4; C32; C5 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Macroeconomic news surprises and volatility spillover in foreign exchange markets (2015)
Working Paper: Macroeconomic news surprises and volatility spillover in foreign exchange markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:48:y:2015:i:2:p:577-607

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DOI: 10.1007/s00181-013-0792-4

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