Through the euro area crisis, financial fragmentation across jurisdictions became a prime concern for the single monetary policy. The ECB broadened the scope of its instruments and enacted a series of non-standard measures to engineer an appropriate degree of policy accommodation. The...

We estimate the effects of quantitative easing (QE) measures by the ECB and the Federal Reserve on the US dollar-euro exchange rate at frequencies and horizons relevant for policymakers. To do so, we derive a theoretically-consistent local projection regression equation from the standard asset...

Central banks unexpectedly tightening policy rates often observe the exchange value of their currency depreciate, rather than appreciate as predicted by standard models. We document this for Fed and ECB policy days using event-studies and ask whether an information effect, where the public...

This paper addresses the possible role of bond prices as operating or intermediate targets for monetary policy. The paper begins with a brief review of the mechanisms through which a central bank could, in theory, influence long-term interest rates, and continues with a brief narrative overview...

This paper examines dollar interventions by the G3 governments since 1989, and the reasons that trader reactions to these interventions might differ over time and across central banks. Market microstructure theory provides a framework for understanding the process by which sterilized central...

The traditional approach to the estimation of the offset and sterilization equations can be criticized for the ad-hoc specification of the reaction function of the monetary authorities and the endogeneity of the domestic credit and foreign reserve variables in the estimated equations. The paper...

The corners hypothesis holds that intermediate exchange rate regimes are vanishing, or should be. Surprisingly for a new conventional wisdom, this hypothesis so far lacks analytic foundations. In part, the generalization is overdone. We nevertheless offer one possible theoretical rationale, a...

If official interventions convey private information useful for price discovery in foreign-exchange markets, then they should have value as a forecast of near-term exchange-rate movements. Using a set of standard criteria, we show that approximately 60 percent of all U.S. foreign-exchange...

The link between exchange rates and interest rates features prominently in the theoretical and empirical literature on small open economies. This paper revisits this relationship using a simple model that incorporates the role of exchange rate pass-through into domestic prices and distinguishes...

This paper compares the link between exchange rates and interest rates under full information and two alternative asymmetric information approaches. It also distinguishes between cases of expansionary and contractionary depreciations. Full information results are not robust to the presence of...