The Euro‐Dollar Exchange Rate: How Traders’ Behaviour Has Been Affected by the 2007–2008 Financial Crisis

39 Pages Posted: 6 Jun 2016

See all articles by Gabriella Cagliesi

Gabriella Cagliesi

University of Greenwich

Antonio Carlo Francesco Della Bina

University of Bologna - Department of Management

Massimo Tivegna

University of Teramo; Luiss University

Date Written: July 2016

Abstract

This paper investigates the dynamics of the Euro/US dollar exchange rate before, during and after the global financial crisis using intra‐day data in a sample covering the period 2003–2011. The paper extends over the conventional empirical framework and specifies an EGARCH (3,1) model to account for heterogeneity in three temporal trading zones and for asymmetric volatility to news. The findings indicate the presence and evolution of differences in Euro/US exchange rate dynamics across American, European and Asian trading zones before and during the financial crisis. As a result of the crisis, traders in the three areas have modified their reactions to scheduled news, unscheduled surprises and content of policies. Developing a better understanding of how traders' behaviour has adjusted since the onset of the crisis is an important issue given the global significance of this exchange rate and the considerable volatility experienced over the sample period.

Suggested Citation

Cagliesi, Gabriella and Della Bina, Antonio Carlo Francesco and Tivegna, Massimo, The Euro‐Dollar Exchange Rate: How Traders’ Behaviour Has Been Affected by the 2007–2008 Financial Crisis (July 2016). Economic Notes, Vol. 45, Issue 2, pp. 139-177, 2016, Available at SSRN: https://ssrn.com/abstract=2790369 or http://dx.doi.org/10.1111/ecno.12053

Gabriella Cagliesi (Contact Author)

University of Greenwich

Antonio Carlo Francesco Della Bina

University of Bologna - Department of Management ( email )

Piazza Scaravilli 1
Bologna, Bologna 40126
Italy

Massimo Tivegna

University of Teramo ( email )

Viale Crucioli 122
Via R. Balzarini 1, Località Colleparco
64100 Teramo
Italy

Luiss University ( email )

via de' Crociferi n. 41
00187 Rome, Roma
Italy

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