Does the Currency Board Matter? U.S. News and Argentine Financial Market Reaction
MAJKS Joint Discussion Paper in Economics No. 23-2008
17 Pages Posted: 18 Nov 2008 Last revised: 9 Jul 2012
Date Written: July 9, 2012
Using a GARCH model, we study the effects of U.S. monetary policy and macroeconomic announcements on Argentine money, stock, and foreign exchange markets over the period January 1998 to July 2007. We show, first, that both types of news have a significant impact on all markets. Second, there are noticeable differences in reaction for different subsamples: Argentine money markets were more dependent on U.S. news under the currency board than after it was abandoned as the floating exchange rate partly absorbs spillover effects from the United States. Finally, we find that U.S.-dollar-denominated assets react less to U.S. news than peso-denominated assets, which suggests that the currency board was not completely credible during its final years.
Keywords: Argentina, Financial Markets, Monetary Policy, Federal Reserve Bank, Central Bank Communication, Macroeconomic Announcements
JEL Classification: E52, F33, G14, G15
Suggested Citation: Suggested Citation