Are FX communications effective? Evidence from emerging markets

EMERGING MARKETS REVIEW
DOI: 
https://doi.org/10.1016/j.ememar.2023.101091
Published: 
Authors:
Julián Andrés Parra-Polanía,
Andrés Mauricio Sánchez-Jabba,
Miguel Sarmiento
Classification JEL: 
E59, F31, G14
Download document

The most recent

Adaptation to Broken Mitigation: Social and Economic Impacts of Solar Mini-Grid Electrification in Colombian Island
Hans-Erik Edsand, Andrés Aleán-Romero, Jhorland Ayala-García, Tania Jiménez Castilla, Sandra C. Valencia
Beyond Access: Gender gaps in university education in Colombia
Ana María Iregui-Bohórquez, Ligia Alba Melo-Becerra, María Teresa Ramírez-Giraldo, Jorge Leonardo Rodríguez Arenas
Smithian State Formation
Diana Ricciulli-Marin, Mateo Uribe-Castro

This paper examines the effects of foreign exchange (FX) communications on FX markets in Colombia and Mexico. Our estimations follow the calendar-time portfolio approach using daily data between 2000 and 2019 on exchange rates and known risk factors. We find an asymmetric effect of such communications: while there is strong evidence indicating that communications aimed at weakening the local currency affect the exchange rate level in the intended direction, there is no evidence of impact when examining communications intended to strengthen it. These results are consistent with fear of appreciation and with previous evidence from developed economies.