Macroeconomic news surprises and volatility spillover in foreign exchange markets
(2015) Empirical Economics : a quarterly journal of the Institute for Advanced Studies, Vienna — Vol. 48, n° 2, p. 577-607 (2015)
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- Abstract
- This paper examines the link between exchange rate volatility and economic fundamentals. In the framework of amultivariate volatility model that allows volatility spillover, we develop a new impulse response analysis to estimate and decompose the simultaneous effect of macroeconomic news surprises on the foreign exchange volatility.We show that news announcement effects include two components: a direct and an indirect effect induced by volatility spillover. We show that more than 50% of the total accumulated news effect on the Pound and the Yen is due to volatility transmission from the two major currencies and mainly from the Euro.
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Ben Omrane, W., & Hafner, C. (2015). Macroeconomic news surprises and volatility spillover in foreign exchange markets. Empirical Economics : a quarterly journal of the Institute for Advanced Studies, Vienna, 48(2), 577-607. https://doi.org/10.1007/s00181-013-0792-4 (Original work published 2015)