How is Macro News Transmitted to Exchange Rates?

Martin Evans and Richard Lyons ()

No 9433, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: F31 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-ifn and nep-rmg
Note: IFM
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Citations: View citations in EconPapers (89)

Published as Evans, Martin D.D.,and Richard K. Lyons. "How is Macro News Transmitted to Exchange Rates?". Journal of Financial Economics, Volume 88, Issue 1, April 2008, Pages 26-50

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Journal Article: How is macro news transmitted to exchange rates? (2008)
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