BALANCE OF TRADE ANNOUNCEMENTS AND ASSET PRICES - INFLUENCE ON EQUITY PRICES, EXCHANGE-RATES, AND INTEREST-RATES

This paper examines the informational impact of trade balance announcements on asset prices including equities, currencies, long- and short-term debt instruments, and financial futures. This study finds that in the 1980s, prior to the 1985 'Plaza Agreement' for international economic cooperation, information in trade balance announcements seem to have influenced only interest rates. However, in the 1985-87 period such announcements also influenced stock prices and currency values. These influences intensify further in the 1987-88 period. Thus, asset prices are sensitive to news in trade balance announcements and this sensitivity seems to have increased significantly in recent years with important implications for asset pricing models and economic policy formulation.