Macroeconomic news, public communications, and foreign exchange jumps around U.S. and European financial crises

Mohamed A. Ayadi, Walid Ben Omrane, Jiahui Wang and Robert Welch

International Journal of Finance & Economics, 2020, vol. 25, issue 2, 197-227

Abstract: Jumps in the Euro, Pound, and Yen, based on 5‐minute returns for the period 2004–2015, are shown to be state dependent between recessions and expansions in their response to macroeconomic news announcements and speeches by treasury and central bank senior officials. We find evidence of large jumps and cojumps response to the Federal Open Market Committee rate decision consistently over economic states. U.S. news is more important than EU news and jump magnitude and probability exhibit positive responses. Federal Reserve senior officials' speeches generate more jumps during the U.S. mortgage crisis and the EU sovereign debt recession. Although public communications of some European Central Bank and Bank of England senior officials cause fewer jumps, they produce significant cojumps of the three major currency markets.

Date: 2020
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