Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30095 
Year of Publication: 
2009
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 2009,08
Publisher: 
Philipps-University Marburg, Faculty of Business Administration and Economics, Marburg
Abstract: 
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, news in both categories and from both countries has an impact on all financial markets. Canadian and U.S. price shocks and monetary policy news are less important than shocks relating to the real economy. 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). The introduction of fixed announcement dates (FAD) 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.
Subjects: 
Bank of Canada
Central Bank Communication
Federal Reserve Bank
Financial Markets
Macroeconomic News
Monetary Policy
JEL: 
E52
G14
G15
Document Type: 
Working Paper

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