Foreign Exchange Responses to Macroeconomic Surprises: Playing “Peek-a-Boo” with Financial Markets
| dc.contributor.author | Nathan, Vignesh | |
| dc.date.accessioned | 2012-04-16T15:56:52Z | |
| dc.date.available | 2012-04-16T15:56:52Z | |
| dc.date.issued | 2012-04-16 | |
| dc.department | Economics | |
| dc.description.abstract | This paper explores the relationship between precisely timed macroeconomic “news” (or “surprises”) and the immediate currency price fluctuations that surround them. Using data from 2005-2011, I find significant movements in foreign exchange markets around a variety of announcements (unemployment, GDP, retail sales, inflation) for three different countries (United States, Australia, Canada). My results demonstrate that in the very short-run, as in the long run, the value of a country’s currency is driven by its macroeconomic fundamentals. Upon further investigation, this paper also uncovers the following financial phenomena in these foreign exchange responses to macroeconomic surprises: asymmetric response, nonlinearity, financial stress, liquidity, and exchange rate specificity. These phenomena refer to the difference in responses between: positive and negative surprises, big versus small surprises, pre-crisis versus crisis surprises, ten- versus sixty-minute returns, and two distinct reference currencies, respectively. | |
| dc.identifier.uri | ||
| dc.subject | Foreign-Exchange | |
| dc.subject | Announcements/Surprises | |
| dc.subject | High-Frequency Data | |
| dc.subject | Liquidity | |
| dc.subject | Financial Crisis | |
| dc.subject | Asymmetric Response | |
| dc.title | Foreign Exchange Responses to Macroeconomic Surprises: Playing “Peek-a-Boo” with Financial Markets | |
| dc.type | Honors thesis |
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