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Domestic or U.S. News: What Drives Canadian Financial Markets?
Using a GARCH model, we study the effects of Canadian and U.S. central bank communication and macroeconomic news on Canadian bond, stock, and foreign exchange market returns and volatility. First, central bank communication and macro news from both countries have an impact on Canadian financial m...
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| Published in: | MAGKS - Joint Discussion Paper Series in Economics (Band 08-2009) |
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| Main Author: | |
| Contributors: | |
| Format: | Work |
| Language: | English |
| Published: |
Philipps-Universität Marburg
2009
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| Subjects: | |
| Online Access: | PDF Full Text |
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| Summary: | Using a GARCH model, we study the effects of Canadian and U.S. central bank
communication and macroeconomic news on Canadian bond, stock, and foreign exchange
market returns and volatility. First, central bank communication and macro news from both
countries have an impact on Canadian financial markets. Second, Canadian central bank
communication is more relevant than its U.S. counterpart, whereas in the case of macro news,
that originating from the United States dominates. Third, we find evidence that the impact of
Canadian news reaches its maximum when the Canadian target rate departs from the Federal
Funds target rate (2002–2004) and thereafter. The introduction of fixed announcement dates
(FAD) initially does not cause a noticeable break in the data. Finally, Canadian and U.S.
target rate changes lead to higher price volatility, and so does other U.S. news. Other
Canadian news, however, lowers price volatility. |
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| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2023.0222 |