EMU-related News and Financial Markets in the Czech Republic, Hungary and Poland
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Philipps-Universität Marburg
Abstract
We analyse the impact of news on five financial markets in the Czech Republic, Hungary and
Poland using a newly constructed data set in a GARCH framework. Macroeconomic shocks
(on GDP, inflation rate, current account and trade balance) are constructed as deviations from
expected values. EMU-related political and fiscal news is captured as news dummies.
Macroeconomic shocks significantly affect short-term interest rates and, to a lesser extent,
other financial variables. Political and fiscal news has an impact on long-term bond yields and
exchange rates. News displayed prominently in our media sources has a greater impact on
financial markets than other news and, in addition, the sources of news themselves matter. We
also discover asymmetric effects of news within markets. Finally, using a pooled GARCH
model we find that macroeconomic shocks have the strongest impact on financial markets in
Hungary, while political news has the largest influence in both Hungary and Poland.
Keywords
Czech Republic, Financial markets, Poland, political news, macroeconomic shocks, Hungary, European Monetary Union