IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v95y2019icp424-443.html
   My bibliography  Save this article

The exchange rate effects of macro news after the global Financial Crisis

Author

Listed:
  • Cheung, Yin-Wong
  • Fatum, Rasmus
  • Yamamoto, Yohei

Abstract

We explore whether the exchange rate effects of macro news are time- and state-dependent by analyzing and comparing the relative influence of US and Japanese macro news on the JPY/USD rate before, during, and after the Global Financial Crisis. A comprehensive set totaling 40 time-stamped US and Japanese news variables and preceding survey expectations along with 5-min indicative JPY/USD quotes spanning the 1 January 1999 to 31 August 2016 period facilitate our analysis. Our results suggest that while US macro news are now more important than before the Crisis, the influence of Japanese macro news has waned to the point of near-irrelevance. These findings are of particular importance to exchange rate modeling of the New Era.

Suggested Citation

  • Cheung, Yin-Wong & Fatum, Rasmus & Yamamoto, Yohei, 2019. "The exchange rate effects of macro news after the global Financial Crisis," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 424-443.
    • Handle: RePEc:eee:jimfin:v:95:y:2019:i:c:p:424-443
    DOI: 10.1016/j.jimonfin.2018.03.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S026156061830158X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jimonfin.2018.03.009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fatum, Rasmus & Hutchison, Michael & Wu, Thomas, 2012. "Asymmetries and state dependence: The impact of macro surprises on intraday exchange rates," Journal of the Japanese and International Economies, Elsevier, vol. 26(4), pages 542-560.
    2. Melvin, Michael & Taylor, Mark P., 2009. "The crisis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1317-1330, December.
    3. Danielsson, J. & Payne, R., 2002. "Real trading patterns and prices in spot foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 21(2), pages 203-222, April.
    4. Chatrath, Arjun & Miao, Hong & Ramchander, Sanjay & Villupuram, Sriram, 2014. "Currency jumps, cojumps and the role of macro news," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 42-62.
    5. Evans, Kevin & Speight, Alan, 2010. "International macroeconomic announcements and intraday euro exchange rate volatility," Journal of the Japanese and International Economies, Elsevier, vol. 24(4), pages 552-568, December.
    6. Martin D. D. Evans & Richard K. Lyons, 2017. "How is Macro News Transmitted to Exchange Rates?," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 14, pages 547-596, World Scientific Publishing Co. Pte. Ltd..
    7. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," American Economic Review, American Economic Association, vol. 93(1), pages 38-62, March.
    8. Dacorogna, Michael M. & Muller, Ulrich A. & Nagler, Robert J. & Olsen, Richard B. & Pictet, Olivier V., 1993. "A geographical model for the daily and weekly seasonal volatility in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 12(4), pages 413-438, August.
    9. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    10. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November.
    11. Natsuki Arai, 2017. "The Effects of Monetary Policy Accouncements at the Zero Lower Bound," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 159-196, June.
    12. Hashimoto, Yuko & Ito, Takatoshi, 2010. "Effects of Japanese macroeconomic statistic announcements on the dollar/yen exchange rate: High-resolution picture," Journal of the Japanese and International Economies, Elsevier, vol. 24(3), pages 334-354, September.
    13. Fatum, Rasmus & Scholnick, Barry, 2008. "Monetary policy news and exchange rate responses: Do only surprises matter?," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 1076-1086, June.
    14. Richard Clarida & Daniel Waldman, 2007. "Is Bad News About Inflation Good News for the Exchange Rate?," NBER Working Papers 13010, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Teona Shugliashvili, 2023. "The words have power: the impact of news on exchange rates," FFA Working Papers 5.006, Prague University of Economics and Business, revised 31 Jul 2023.
    2. Wang, Wenhao & Lin, Zhitao & Hu, Bing, 2023. "Macro news effects on exchange rates: Difference between carry trade target and safe-haven currencies," Finance Research Letters, Elsevier, vol. 53(C).
    3. Adrian Jäggi & Martin Schlegel & Attilio Zanetti, 2019. "Macroeconomic surprises, market environment, and safe-haven currencies," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-21, December.
    4. Masahiro Yamada & Takatoshi Ito, 2020. "Price Discovery and Liquidity Recovery: Forex Market Reactions to Macro Announcements," NBER Working Papers 27036, National Bureau of Economic Research, Inc.
    5. Munazza Jabeen & Abdul Rashid & Hajra Ihsan, 2022. "The news effects on exchange rate returns and volatility: Evidence from Pakistan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 745-769, January.
    6. Ederington, Louis & Guan, Wei & Yang, Lisa (Zongfei), 2019. "The impact of the U.S. employment report on exchange rates," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 257-267.
    7. Konstantinos Gkillas & Paraskevi Katsiampa & Dimitrios I. Vortelinos & Mark E. Wohar, 2023. "Greek government‐debt crisis events and European financial markets: News surprises on Greek bond yields and inter‐relations of European financial markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4037-4054, October.
    8. Munazza Jabeen & Abdul Rashid, 2022. "Macroeconomic News and Exchange Rates: Exploring the Role of Order Flow," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 222-245, May.
    9. Firouzi, Shahrokh & Wang, Xiangning, 2021. "The interrelationship between order flow, exchange rate, and the role of American economic news," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    10. Thi‐Hong‐Van Hoang & Wojciech Przychodzen & Justyna Przychodzen & Elysé A. Segbotangni, 2020. "Does it pay to be green? A disaggregated analysis of U.S. firms with green patents," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1331-1361, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fatum, Rasmus & Hutchison, Michael & Wu, Thomas, 2012. "Asymmetries and state dependence: The impact of macro surprises on intraday exchange rates," Journal of the Japanese and International Economies, Elsevier, vol. 26(4), pages 542-560.
    2. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    3. Walid Ben Omrane & Robert Welch & Xinyao Zhou, 2020. "The dynamic effect of macroeconomic news on the euro/US dollar exchange rate," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(1), pages 84-103, January.
    4. Rasmus Fatum & Michael Hutchison & Thomas Wu, 2008. "Do Both U.S. and Foreign Macro Surprises Matter for the Intraday Exchange Rate? Evidence from Japan," EPRU Working Paper Series 2009-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Jan 2009.
    5. Weber, Christoph S., 2019. "The effect of central bank transparency on exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 165-181.
    6. Masahiro Yamada & Takatoshi Ito, 2020. "Price Discovery and Liquidity Recovery: Forex Market Reactions to Macro Announcements," NBER Working Papers 27036, National Bureau of Economic Research, Inc.
    7. Yamada, Masahiro & Ito, Takatoshi, 2022. "Price discovery and liquidity recovery: Forex market reactions to macro announcements," Journal of International Money and Finance, Elsevier, vol. 120(C).
    8. Rime, Dagfinn & Sarno, Lucio & Sojli, Elvira, 2010. "Exchange rate forecasting, order flow and macroeconomic information," Journal of International Economics, Elsevier, vol. 80(1), pages 72-88, January.
    9. Tomáš Plíhal, 2021. "Scheduled macroeconomic news announcements and Forex volatility forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(8), pages 1379-1397, December.
    10. Ben Omrane, Walid & Savaser, Tanseli & Welch, Robert & Zhou, Xinyao, 2019. "Time-varying effects of macroeconomic news on euro-dollar returns," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    11. King, Michael R. & Osler, Carol L. & Rime, Dagfinn, 2013. "The market microstructure approach to foreign exchange: Looking back and looking forward," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 95-119.
    12. El Ouadghiri, Imane & Uctum, Remzi, 2016. "Jumps in equilibrium prices and asymmetric news in foreign exchange markets," Economic Modelling, Elsevier, vol. 54(C), pages 218-234.
    13. Ben Omrane, Walid & Savaşer, Tanseli, 2016. "The sign switch effect of macroeconomic news in foreign exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 96-114.
    14. Rasmus Fatum & Naoko Hara & Yohei Yamamoto, 2024. "Negative Interest Rate Policy and the Influence of Macro‐Economic News on Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(5), pages 1261-1285, August.
    15. Hutchison, Michael & Sushko, Vladyslav, 2013. "Impact of macro-economic surprises on carry trade activity," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1133-1147.
    16. Tamgac, Unay, 2021. "Emerging market exchange rates during quantitative tapering: The effect of US and domestic news," Research in International Business and Finance, Elsevier, vol. 57(C).
    17. Wu, Zhen-Xing & Gau, Yin-Feng, 2022. "Informativeness of trades around macroeconomic announcements in the foreign exchange market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    18. Rognone, Lavinia & Hyde, Stuart & Zhang, S. Sarah, 2020. "News sentiment in the cryptocurrency market: An empirical comparison with Forex," International Review of Financial Analysis, Elsevier, vol. 69(C).
    19. Konstantinos Gkillas & Dimitrios Vortelinos & Christos Floros & Alexandros Garefalakis & Nikolaos Sariannidis, 2020. "Greek sovereign crisis and European exchange rates: effects of news releases and their providers," Annals of Operations Research, Springer, vol. 294(1), pages 515-536, November.
    20. S. Rubun Dey & Christopher J. Neely, 2010. "A survey of announcement effects on foreign exchange returns," Review, Federal Reserve Bank of St. Louis, vol. 92(Sep), pages 417-464.

    More about this item

    Keywords

    Foreign exchange rates; Macro news surprises; Global Financial Crisis;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:95:y:2019:i:c:p:424-443. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.