New evidence on the effects of US monetary policy on exchange rates

We examine the impact of US monetary policy shocks on exchange rates using the monetary policy indicator proposed by Bernanke and Mihov [Quarterly Journal of Economics, 113 (1998) 869–902]. We find evidence for instantaneous, rather than delayed, US dollar overshooting after a monetary shock when relative output and relative prices are included in the VAR specification. The forward premium puzzle persists due to the interest rate differential response.

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Year of publication:	2001-05
Authors:	Kalyvitis, Sarantis ; Michaelides, Alexander
Institutions:	London School of Economics (LSE)
Subject:	monetary policy \| overshooting \| excess returns \| forward premium puzzle

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Extent:	application/pdf
Series:	LSE Research Online Documents on Economics.
Type of publication:	Book / Working Paper
Notes:	Published in Economics Letters, May, 2001, 71(2), pp. 255-263. ISSN: 0165-1765
Classification:	F3 - International Finance ; G3 - Corporate Finance and Governance ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; F31 - Foreign Exchange
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010745023