The sign switch effect of macroeconomic news in foreign exchange markets

Omrane, Walid Ben; Savaşer, Tanseli

doi:10.1016/j.intfin.2016.07.002

Cited by 21 publications

(9 citation statements)

References 26 publications

(61 reference statements)

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“…The response was examined based on the following variables: changes in non-farm payrolls, CPI, core CPI, PPI, Trade Balance, Retail Sales, ISM Non-Manufacturing PMI, ISM Manufacturing PMI, Pending Home Sales, Housing Starts, Existing Home Sales, Building Permits, Core Durable Goods Orders, Factory Orders, and CB Consumer Confidence. This is data of tremendous significance for foreign currency investors, confirmed by numerous studies (Cheung and Chinn, 2001;Omrane and Savaşer, 2016;Evans and Speight, 2010). In the instance of the Mexican economy, the short-term response of the exchange rate to the following macroeconomic data has been studied, Unemployment Rate, CPI inflation rate, Trade Balance, Retail Sales, and Industrial Production.…”

Section: Methodsmentioning

confidence: 71%

Response of the USD/MXN Exchange Rate to Macroeconomic Data

Pasionek¹

2021

ERSJ

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Purpose:The study aims to demonstrate the different roles of national and American macroeconomic variables as the determinants of short-term responses of the USD/MXN exchange rate. Design/Methodology/Approach: The study has employed regression analysis and the statistical analysis technique, within the framework of which the linear regression model has been used with the GARCH process for the random element. The model parameters have been estimated based on 30-minute data concerning currency exchange rates of three currency pairs subjected to analysis. The estimation of parameters has been conducted in the Stata 15 program. The currency exchange data were obtained from the Meta Trader 4 electronic trade platform. The study has employed the macroeconomic calendar of Investing.com, a global financial platform recognized by the world's investors. The econometric analysis has covered the period from January 2012 to December 2018. The series involved 185518 observations for the USD/MXN currency pair. Findings: The exchange rate of the USD/MXN currency pair responds more profoundly to US macroeconomic data than to national economic data, however with the proviso that this applies exclusively to some critical data, in particular, non-farm payrolls and core CPI. Practical implications: The study results have a cognitive as well as an application dimension.As regards the mental size, the article may be a source of knowledge on the Forex market and the determinants of shaping the USD/MXN exchange rate. As for the application dimension, the study results may be helpful for currency market players. The study may be addressed to investors who conduct transactions involving the USD/MXN currency pair. The proper identification of the currency exchange response translates into investment success. Originality/Value: To date, there have been no attempts to study the impact of 15 types of US macroeconomic data and 5 Mexican pieces of macroeconomic data within the M30 interval. The author believes that the conducted study will assist in making decisions by Forex market investors involved in USD/MXN currency pair investing.

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Section: Methodsmentioning

confidence: 71%

Response of the USD/MXN Exchange Rate to Macroeconomic Data

Pasionek¹

2021

ERSJ

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“…Our main contribution consists in examining the effect of macroeconomic news announcements on jumps and cojumps for three major currencies around the major recent recessions; U.S. and EU financial crises. Ben Omrane and Savaser (, ) show that the crises periods could be modeled using predefined dummy variables (take the value one during expansion and zero otherwise) or estimated endogenously. Although the implementation of the dummy is simple, it includes a type of subjectivity bias and yields different dates from an ex ante measure.…”

Section: Methodsmentioning

confidence: 99%

“…They find that the volatility of news, especially negative news, increases more in good times compared with bad times. Ben Omrane and Savaser () demonstrate that macroeconomic news announcements corresponding to consumption, credit, and housing market change their sign as the regime switches during the 2005–2009 period. Ben Omrane and Savaser () show that volatility response to news is stronger in expansions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The advantage of this method is that the estimated transition logistic functions corresponds to the probabilities of being in an economic state, which replaces the ex‐post periods provided by international institutions such as the National Bureau of Economic Research (NBER) in the United States or the Center of Economic and Policy Research (CEPR) in Europe. Although both institutions are well respected and their approach is used in previous research (Ben Omrane & Savaser, ), others, such as Melvin and Taylor () and Fratzscher (), develop their own definitions for business cycles because the NBER and CEPR dates could include a subjectivity bias as well as differ from ex ante measures.…”

Section: Introductionmentioning

confidence: 99%

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

et al. 2019

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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.

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“…The post-FOMC increase investment in bonds to four times the ratio of buy-and-hold assets after expansionary shocks. Li et al (2015), Ben Savaser (2016) andW. Ben Omrane et al (2019) analyse the "stable" effects of central bank announcements on the exchange rate.…”

Section: Introductionmentioning

confidence: 99%

The MPC meetings, macroeconomic announcements and exchange rate behaviour in Nigeria

Gbadebo

Adekunle

Akande

et al. 2021

Cogent Economics & Finance

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Literature recognise that announcement impinge shocks which could shift the mean behaviour of the exchange rate. This study apply event driven models to analyse how the expectation of daily log-exchange rate and its daily logreturn respond to all the 88 MPC meetings and selected CBN's announcements that "contained information on exchange rate stabilisation" from 2 January 2005 to 25 September 2020. We establish that the log-exchange rate responds to the announcements, with and without the MPC meetings. The exchange rate is expected to depreciate in all the three days before, on the announcement day, and all the three days after the announcement. There is no sufficient evidence that either the MPC meeting or CBN announcement affects the behaviour of the logreturn. Hence, unlike the MPC meetings, the announcements affects the exchange ABOUT THE AUTHOR Gbadebo has taught Econometrics, Computational Economics, Economic Theory and International Finance. He is an economist and a finance expert. His recent focus is on Macroeconomic, Monetary and Financial Forecasting, Blockchain, Neural Networks and Machine Learning.

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The sign switch effect of macroeconomic news in foreign exchange markets

Cited by 21 publications

References 26 publications

Response of the USD/MXN Exchange Rate to Macroeconomic Data

Response of the USD/MXN Exchange Rate to Macroeconomic Data

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

The MPC meetings, macroeconomic announcements and exchange rate behaviour in Nigeria

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