The Effects of Sentiment on Extreme Movements in Exchange Rates. Issue 3 (3rd July 2022)

• Record Type: Journal Article
• Authors: Hwang, Soosung; Lee, Eunji
• Is Part Of: International economic journal. Volume 36:Issue 3(2022)
• Page Start: 445
• Page End: 460
• Publication Date: 2022-07-03
• Subjects: GSADF Test -- sentiment -- extreme movements of exchange rates -- Sharp decrease in exchange rates; G41 -- E71 -- F31; Economics -- Periodicals; International economic relations -- Periodicals; Korea (South) -- Economic conditions -- 1960- -- Periodicals; 337
• DOI: 10.1080/10168737.2022.2114098
• Languages: English
• ISSNs: 1016-8737

Abstract

Abstract : We investigate details of the effects of sentiment on dollar exchange rates in six countries, in particular, during periods of extreme movements. Using the Generalized Sup Augmented Dickey-Fuller (GSADF) test, we first show evidence that there are periods of explosive patterns in the exchange rates during the sample period from January 2000 to December 2020. We then examine how sentiment affects the exchange rates during the periods of the extreme movements. Our results show that sentiment has significant effects on exchange rates only when the exchange rates decrease in extreme ways, i.e. the currencies appreciate sharply against the USD. Moreover, these sharp appreciations occur when sentiment in the six countries is more optimistic than that in the US. Therefore, our study shows that currency values appreciate by sentiment and this happens rapidly over a short period.