Suk-Joong Kim

Central bank intervention and exchange rate volatility -- Australian evidence

Abstract This paper examines the key characteristics of foreign exchange intervention by the Reserve Bank of Australia in the period 1983–1997, which can be broken into five distinct phases. We investigate the changing effectiveness of daily intervention on the

International Linkages and Macroeconomic News Effects on Interest Rate Volatility - Australia and the US'

US/

The spillover effects of US and Japanese public information news in advanced Asia-Pacific stock markets

A exchange rate by decomposing the exchange rate response to the intervention into various separate components. We find contemporaneous positive correlation between the direction of intervention and the conditional mean and variance of exchange rate returns. We show that sustained and large interventions have a stabilising influence in the foreign exchange market in terms of direction and volatility. Without these interventions, the market would have moved further and exhibited more volatility.

Exchange Rates, Interest Rates and Current Account News: Some Evidence from Australia

We examine international linkages between daily time series of US and Australian 3 month Treasury Bills and 10 year Government Bonds from 1987-95, paying particular attention to the effects of macroeconomic announcements in both countries. The 2 countrys interest rate data are modelled by a bivariate EGARCH formulation. The results suggest that market participants believed the Reserve Bank of Australia targetted the CPI, while the Federal Reserve targetted economic activity. US macroeconomic activity announcements significantly moved Australian interest rates, particularly at the short end. Australian interest rates moved significantly in response to the previous days US interest rate shocks. The conditional volatilities of the Australian interest rate changes were also significantly influenced by lagged US interest rate shocks, as well as by surprises in US macroeconomic announcements. Some macroeconomic news announcements raised conditional volatilities, while others reduced them. Overall there was a remarkable and complex array of linkages between the 2 countries.

Do Australian and the US macroeconomic news announcements affect the USD/AUD exchange rate? Some evidence from E-GARCH estimations

This paper investigates the nature of information leadership of the U.S. and Japan in the advanced Asia-Pacific stock markets. Instead of just relying on return and return volatility spillovers from major markets, specific and disaggregated news events are also utilized. In particular, the aim is to examine the nature of spillover effects of scheduled announcements of the U.S. and Japanese macroeconomic variables in the advanced Asia-Pacific stock markets of Australia, Hong Kong and Singapore for the period 2 January 1991 to 31 May 1999. The investigation reveals that both U.S. and Japanese announcement news elicit significant first and second moment influences on the returns of the other markets, in general, and that there is a complex array of significant market responses to various news announcements. There is also strong evidence of markets responding differently to bad news announcements compared to overall news (including both good and bad news) announcements which indicate that the information content of each economic announcement is a source of tradable information rather than the act of releasing economic figures. Thus, this paper contributes to the literature by shedding light on the important drivers of the documented information leadership of the U.S. and Japanese stock markets.

Minute-by-minute dynamics of the Australian bond futures market in response to new macroeconomic information

This paper investigates the Australian current account announcement effects on exchange rates and interest rates for the period July 1985 to December 1992. The results indicate that the Australian dollar depreciates and interest rate rise as a result of an announcement of larger than expected current account deficit, which is consistent with the portfolio balance effect. In addition, significant structural breaks are found and the analysis shows that after December 1989 the current news affect neither exchange rates nor interest rates.

Do macro-economic news announcements affect the volatility of foreign exchange rates? Some evidence from Australia

Abstract This paper examines the effects of scheduled Australian and US macroeconomic announcements on daily USD/AUD exchange rate changes. EGARCH(1,1) models are used to investigate news effects on the conditional mean and volatility of the changes over various time horizons encompassing the announcements. A higher than expected Australian current account deficit announcement depreciated the AUD while an unexpectedly higher Australian GDP growth rate appreciated it on the announcement day during the Australian market trading. The conditional volatility was higher in response to the Australian current account deficit and inflation news, while the retail sales news lowered it. The US announcements, in general, had little effect during the US market trading, however, news effects measured over wider time horizon encompassing the next calendar days Australian trading turned out to be more significant. Unexpectedly large US trade deficit and unemployment announcements appreciated the AUD while the trade deficit and retail sales news raised the conditional volatility and the unemployment news lowered it.

Testing the Rationality of Exchange Rate and Interest Rate Expectations: An Empirical Study of Australian Survey Based Expectations

Abstract This paper investigates the response efficiency of the 10 year Australian Commonwealth bond futures market to the news content of the Australian scheduled information release from January 1993 to July 1997. Using Money Market Services market expectations data to generate the news component of announcements, we find that the futures price falls in response to higher than expected current account deficit, inflation, GDP and retail sales announcements, whereas an unexpected rise in unemployment raised it. In addition to the price response, there is strong evidence of elevated volatility of the price and of trading volumes following all five news announcements. More importantly, most of the market adjustments (of price and volatility) to new information were completed during the first minute following each news announcement suggesting market efficiency of the Australian futures market. The trading volumes, on the other hand, continue to respond to news for 1 h following the news release. This suggests that, after the new equilibrium price has been quickly established and its volatility dispersed, volume trading persists for the purposes of portfolio re-balancing by liquidity traders and for establishing a complete consensus amongst traders.

The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets

This paper investigates the role of Australian macro-economic announcement news on five major Australian dollar (AUD) exchange rates. Specifically, the daily changes of the exchange rates are modelled to ascertain the existence and the nature of the news effects in the conditional mean and variance of the changes. It is found that a higher than expected current account deficit and unemployment rate announcements depreciated the AUD, and an unexpectedly higher GDP growth announcement appreciated it. Current account deficit, CPI and unemployment news announcements significantly raised the conditional volatility of the changes of the AUD on the days of their announcements, except for the BP/AUD for the CPI news, and there is some evidence of retail sales news reducing it. In general, the evidence is consistent with a view that a release of new information creates uncertainty in the markets due to a lack of consensus on the effects of the particular news announcement and the necessary course of action. In addition, the EGARCH(1,1)-in-Mean modelling of the daily changes of the exchange rates is found to be very successful in addressing the observed statistical properties of the daily changes: leptokurtosis, time-varying heteroscedasticity and asymmetric response of the conditional volatility to unexpected changes.

Dynamics of Bond Market Integration between Existing and Accession EU Countries

This paper examines the rationality of the Australian survey-based expectations, 1- and 4-week-ahead