The Impact of Transatlantic M&A Activity on the Dollar/Euro Exchange Rate

This special feature explores the extent to which transatlantic M&A deals are associated with movements in the dollar/euro exchange rate over the period 1 January 1999 to 30 September 2001. Three hypotheses are typically put forward to explain the potential impact of cross-border mergers on the exchange rate: the transactions effect, the portfolio effect and the announcement effect. In this paper, we test whether the last of these effects shows up in transatlantic M&A data and also provide some evidence on the first hypothesis