High frequency jumps responses of asset prices on FX announcements and oral interventions

Christelle Lecourt, Deniz Erdemlioglu, Hanz Dewachter

Research output: Other contribution

Abstract

In this paper, we investigate the intraday dynamics of financial markets around the oral interventions of the US and Euro area policy-makers. Based both on filtered-jumps exchange rate volatility and an event-study methodology, we shed light on the debate about the responses of exchange rate volatility to verbal FX announcements. We find that exchange rates exhibit sudden movements and jumps in response to the communication events. When controlling the changes in the intradaily volatility dynamics from the jump-responses to statements, the results show that volatility around verbal interventions is not higher after than before the news and that the information content is absorbed by the markets in several hours. Our results suggest that US and Euro area authorities tend to communicate with markets on days when uncertainty is rather severe. Nevertheless, we find no strong evidence that FX communication policies reduce uncertainty and calm disordered markets at least at the intraday level.
Original languageEnglish
PublisherJournal of International Money and Finance
Publication statusAccepted/In press - 2014

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Lecourt, C., Erdemlioglu, D., & Dewachter, H. (2014). High frequency jumps responses of asset prices on FX announcements and oral interventions. Journal of International Money and Finance.