Economic news, exchange rates and interest rates

The paper examines the post-October 1979 response of exchange rates and interest rates to the new information contained in the first announcement of fifteen US macroeconomic series. Markets respond primarily to monetary news, but also to news about the trade deficit, domestic inflation, and variable...

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Bibliographic Details
Published in:Journal of international money and finance 1988-03, Vol.7 (1), p.23-35
Main Author: Hardouvelis, Gikas A.
Format: Article
Language:English
Subjects:
Economic indicators
Economic models
Exchange rates
Foreign exchange rates
Interest rates
Macroeconomics
News
Regression analysis
Responses
Trade deficit
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Summary:The paper examines the post-October 1979 response of exchange rates and interest rates to the new information contained in the first announcement of fifteen US macroeconomic series. Markets respond primarily to monetary news, but also to news about the trade deficit, domestic inflation, and variables that reflect the state of the business cycle. For all fifteen macroeconomic variables, an increase (decrease) in interest rates is accompanied by an appreciation (depreciation) of the dollar, which is consistent with models that stress price rigidity and absence of purchasing power parity.
ISSN:0261-5606
1873-0639
DOI:10.1016/0261-5606(88)90003-4