The results of recent empirical studies on the relationships among Federal Reserve monetary-policy actions, U.S. interventions in currency markets, and exchange rates are re-examined. Changes in the Federal Reserve's federal funds rate target as measure of monetary-policy actions are used. Then...

One puzzling feature of recent empirical studies of the effects of monetary policy changes on exchange rates is the result that the exchange rate does not adjust immediately to the policy shock. Instead, these studies find that it can take as long as two years for the exchange rate to fully...