The reaction of monetary policy to exchange rate

In this study we analyze the relationship between monetary policy and the exchange rate using the ITH method. We determine regime changes based on two different methods: First, we allow the data to determine the regime changes and estimate the reaction of monetary policy to different exchange rates such as Yen/$, Index/$ and Pound/$ . Second, we determine regime changes exogenously, based on the historical exchange rate policies in the United States and estimate the reaction of monetary policy to exchange rates.