Prague Economic Papers 2018, 27(5):505-521 | DOI: 10.18267/j.pep.670

The Impact of German Macroeconomic News on Emerging European Forex Markets

Michala Moravcová
Institute of Economic Studies, Charles University, Prague, Czech Republic (moravcovamichala@gmail.com)

This paper analyses the impact of German macroeconomic news announcements and ECB meeting days on the conditional volatility of the Czech, Polish, and Hungarian Foreign Exchange markets as proxied by CZK/EUR, PLN/EUR, and HUF/EUR exchange rate returns over six years (2010-2015). A currency intervention period (11/2013-2015) in the Czech Republic is examined separately. EGARCH-type models with normal and Student's t-distributions are employed. The comprehensive analysis shows the following results. (i) The IFO index, Factory Orders increase and the PMI index from the Service Sector, the labour market data decrease conditional volatility of PLN/EUR. (ii) The IFO index and Industrial Production increase conditional volatility of HUF/EUR on the day of the announcement. (iii) Data from the labour market has a calming effect on CZK/EUR after the central bank launched currency interventions. (iv) IFO index increases and the PMI index from the Manufacturing Sector decreases conditional volatility of CZK/EUR before currency interventions were introduced (2010-11/2013).

Keywords: exchange rate volatility, heteroscedasticity, EGARCH, macroeconomic news announcements
JEL classification: C52, F31, F36, G15, P59

Accepted: February 13, 2018; Published: October 1, 2018  Show citation

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Moravcová, M. (2018). The Impact of German Macroeconomic News on Emerging European Forex Markets. Prague Economic Papers, 27(5), 505-521. doi: 10.18267/j.pep.670
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