How is Macro News Transmitted to Exchange Rates? (December 2003)
Martin D. D. Evans(Georgetown University and NBER) and Richard K. Lyons(U.C. Berkeley and NBER, Haas School of Business) ()
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Martin D. D. Evans(Georgetown University and NBER) and Richard K. Lyons(U.C. Berkeley and NBER, Haas School of Business): Department of Economics, Georgetown University, http://www9.georgetown.edu/faculty/evansm1/
Authors registered in the RePEc Author Service: Martin Evans () and
Richard K. Lyons ()
Working Papers from Georgetown University, Department of Economics
This paper tests whether macroeconomic news is transmitted to exchange rates via the transactions process and if so, what share occurs via transactions versus the traditional direct channel. We identify the link between order flow and macro news using a heteroskedasticity-based approach, a la Rigobon and Sack (2002). In both daily and intra-daily data, order flow varies considerably with macro news flow. At least half of the effect of macro news on exchange rates is transmitted via order flow.
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