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Arthur Korus/Kaan Celebi: The Impact of Brexit on the British Pound/Euro Exchange rate

Arthur Korus/Kaan Celebi: The Impact of Brexit on the British Pound/Euro Exchange rate

 

 

Summary

 

Using event-study techniques we investigate the impact of Brexit-related events on the spot exchange rate of the British pound against the euro. We want to find out whether Brexit-related news, including the Brexit referendum itself, has an impact on the Pound sterling/Euro exchange rate. By splitting our Brexit-related events into ‘good’ Brexit news and ‘bad’ Brexit news, we find an impact of Brexit news on the British pound/Euro exchange rate. Bad Brexit news is associated with a depreciation of the British pound against the euro whereas ‘good’ Brexit news appreciates the Pound sterling against the euro. Furthermore, our empirical results suggest that market participants display a delayed reaction to bad and good Brexit news, respectively. Additionally, it seems that the impact of bad Brexit news on the spot exchange rate of the British pound against the euro is more persistent than the effect of good Brexit news.

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