News and Exchange Rate Dynamics

Economics With the vast amount of information that economic operators and the public in general have to interpret nowadays, communication has acquired an extraordinary importance, unimaginable even a few years ago. The global economy is above all the economy of information. Communication, while always an art to some extent, is now becoming a science, as evidenced also by the creation of so many University majors in this discipline in Italy. This book is but an example of this phenomenon: it uses the tools of economic analysis and econometrics in order to explain the variations in exchange rates, by examining the international markets' reactions to the various forms of macroeconomic and political news.

Table of Contents:
List of Figures VI; List of Tables VI; Authors VII; Introduction to the English Edition VIII; Introduction to the Italian Edition by Mario Sarcinelli X; List of Abbreviations XIII; I. "Newsmetrics": measurement of news impact in the foreign exchange market 1; 1.1. Theories of exchange rate determination. - 1.2. Newsmetrics. - 1.3. Uses of Newsmetrics. - 1.4. Development of the study. II. The foreign exchange market in 1994-97: events, trends and economic policies. 15; 2.1. The dollar in 1995: depreciation and attempts at stabilisation. - 2.2. The dollar in 1996: the long-overdue rally. - 2.3. 1997: a strong dollar. - 2.4. The Lira during the Berlusconi government: March-December 1994. - 2.5. The lira during the Dini government in 1995. - 2.6. The lira in 1996: crisis of the Dini government, beginning of the Prodi government, re-entry in the ERM. - 2.7. The Lira in 1997: the Prodi government and the debate on the European Monetary Union. III. The Italian news 64; 3.1. Introduction. - 3.2. Quantitative news. - 3.3. Qualitative news. - 3.3.1. The news of the Berlusconi government. - 3.3.2. The news of the Dini government. - 3.3.3. End of the Dini government. The Maccanico attempt. The elections. - 3.3.4. The news of the Prodi government. - 3.3.5. Political news that are common to all three governments. - 3.3.6. The economic news. IV. Economic and political news for Germany and the United States 71; 4.1. Introduction. - 4.2. American quantitative news. - 4.3. German quantitative news. - 4.4. American and German qualitative news on the economic situation and on monetary policy. V. The events of the European Monetary Union 76; 5. The historical timeline. - 5.2. The classification of events. VI. Statements by monetary and governmental authorities in the United States, Germany and Japan 80; 6.1. Introduction. - 6.2. The Bundesbank. - 6.3. German government officials. - 6.4. American monetary and political authorities. - 6.5. Japanese monetary and political authorities. VII. The impact of news on exchange rates 97; 7.1. Introduction and preliminary conclusions. - 7.2. A taxonomy of events in the foreign exchange markets. - 7.3. The impact of news on the exchange rate. - 7.3.1. Econometric estimation strategies. - 7.3.2. DM-USD and Yen-USD equations. - 7.3.2.1. The European trading zone. - 7.3.2.2. The United States trading zone. - 7.3.3. Lira-DM equations. VIII. Events and foreign exchange markets 136; 8.1. Introduction. - 8.2. Novelties. - 8.3. The metrics of news. - 8.4. A communication model. - 8.5. Market sentiment and polarisation. - 8.6. Practical applications and further research. Bibliography 151

About the Author :
Massimo Tivegna, born in Rome in 1945, is a Professor of Political Economy and Econometrics in the Faculty of Political Sciences at the University of Teramo and at LUISS Guido Carli, in Rome. He taught at the University of Rome "Tor Vergata", at the University of Perugia and at the University of Pennsylvania. He worked in the Bank of Italy, the Confederation of Italian Industry (Confindustria) and, as a consultant, at Wharton Econometric Forecasting Associates (WEFA) in Philadelphia, Istituto Mobiliare Italiano (IMI), the General Accounting Office of the Treasury in Italy and recently at Banca di Roma. Grazia Chiofi, born in Rome in 1971, works in the Wholesale and International Banking Division of Banca Nazionale del Lavoro. She graduated at the University of Rome "Tor Vergata" and has been teaching ever since part-time Econometrics at Tor Vergata and at LUISS Guido Carli. Mario Sarcinelli is a Lecturer of Monetary Economics at the University of Rome "La Sapienza" and of Global Banking at LUISS Guido Carli. He was Deputy Director General at the Bank of Italy, where he spent a large part of his career, and later Minister of Foreign Trade, Director General of the Treasury, Operations Vice President at the EBRD and Chairman of Banca Nazionale del Lavoro.