This paper studies the impact effect of monetary policy shocks - identified by the reaction of three month market interest rates to policy announcements - on the exchange rate in Australia, Canada, and New Zealand during the 1990s. The main results are that (i) on average, a 100 basis point...

This paper presents a model in which investors, acting in self-interest, force interest rates to the levels desired by the monetary authority. If interest rates move out of line with those required by the monetary authority, a statement (an open mouth operation) is all that is needed to restore...

We propose a two-step approach to estimate multi-dimensional monetary policy shocks and their causal effects requiring only daily financial market data and policy events. First, we combine a heteroscedasticity-based identification scheme with recursive zero restrictions along the term structure...