Macroeconomic Announcements and Uncertainty Resolving : Empirical Evidence from the Eurozone

Abstract: Studying and identifying the impact of the macroeconomic news on the uncertainty, measured by the implied volatility index behavior in the European financial market, is the main goal of this study. The macroeconomic variables are regarded in this study are consumer price index CPI, the gross domestic product GDP, employment reports EMP, monetary policy MP, labor cost LC, and the current account for the Eurozone CA. In this study, I employ various statistical approaches to understand to what extent the uncertainty is resolved due to the macroeconomic news, namely, dummy OLS regression, GARCH (1,1), GARCH-M (1,1), and EGARCH (1,1). The reported findings uncover that only the monetary policy has a significant impact on the implied volatility index, thus, the uncertainty associated with this indicator is resolved during the announcement days. The results confirm also that the investors in the Eurozone financial market consider more than one macroeconomic variable as the viable source for the information, as the joint effect for each of CPI, GDP, LC, and MP is statically different from zero. Further, the uncertainty significantly increases prior to the CPI announcements and resolved during MP announcements.