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Exchange-rate and news: Evidence from the COVID pandemic
Tommaso Aquilante1, Federico Di Pace1, Riccardo M Masolo1,2
1Bank of England, Threadneedle St, London, EC2R 8AH, United Kingdom.
Abstract:
We estimate daily linear regressions and panel VAR to study the effect of Covid-19 news on exchange rates. We find that adverse pandemic news at the country level cause an immediate, statistically significant, depreciation of the domestic currency vis-à-vis a basket of trade-weighted currencies. This effect is more pronounced for free-floating economies.
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