The Impact of Foreign Macroeconomic News on Financial Markets in the Czech Republic, Hungary, and Poland
MAGKS Working Paper No. 03-2009
21 Pages Posted: 4 Feb 2009 Last revised: 1 Dec 2010
Date Written: November 30, 2010
In this paper, we investigate the effects of euro area and US macroeconomic news on financial markets in the Czech Republic, Hungary, and Poland (CEEC-3) from 1999 to 2006. Using a GARCH model, we examine the impact of news on daily returns of three-month interest rates, stock market indices, exchange rates versus the euro, and the US dollar. First, both US and European macroeconomic news has a significant impact on CEEC-3 financial markets. Second, the process of European integration is accompanied by an increasing importance of euro area news relative to US news. Third, there are country-specific differences: for example, the Czech stock market is relatively more affected by foreign news since the Copenhagen Summit in December 2002. In general, our results support the hypothesis of a deepening euro area influence on the CEEC-3 over time and a corresponding reduction in the relative importance of US shocks.
Keywords: Czech Republic, European Monetary Union, Financial Markets, Hungary, Macroeconomic News, Poland
JEL Classification: G12, G15, F30
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