Premium
FOREIGN EXCHANGE MARKET REACTION TO THE U.S.‐CANADA FREE TRADE AGREEMENT
Author(s) -
Hogan Kedreth,
Sultan Jahangir
Publication year - 1994
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1994.tb00164.x
Subject(s) - liberian dollar , volatility (finance) , economics , free trade agreement , exchange rate , foreign exchange , spot contract , monetary economics , international economics , us dollar , financial economics , free trade , finance , futures contract
In this paper we investigate the effect of news about the advent of the U.S.‐Canada Free Trade Agreement (FTA) on the exchange rate between the Canadian dollar and the U.S. dollar. We find evidence that information flows related to the likelihood of the FTA influenced the volatility of the daily spot rate. In particular, information that increased the likelihood of the FTA subsequently diminished exchange rate volatility. In contrast, information that decreased the likelihood of the FTA subsequently increased exchange rate volatility.