The effects of conventional and unconventional monetary policy on exchange rates
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- dc.contributor.author Inoue, Atsushi
- dc.contributor.author Rossi, Barbara, 1971-
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:26:54Z
- dc.date.available 2020-05-25T09:26:54Z
- dc.date.issued 2018-12-08
- dc.date.modified 2020-05-25T09:25:51Z
- dc.description.abstract What are the effects of monetary policy on exchange rates? And have unconventional monetary policies changed the way monetary policy is transmitted to international financial markets? According to conventional wisdom, expansionary monetary policy shocks in a country lead to that country's currency depreciation. We revisit the conventional wisdom during both conventional and unconventional monetary policy shocks as changes int he whole yield curve due to unanticipated monetary policy moves and allows monetary policy shocks to differ depending on how they affect agents' expectations about the future path of interest rates as well as their perceived effects on the riskiness/uncertainty in the economy. Our empirical results show that: (i) a monetary policy easing leads to a depreciation of the country's spot nominal exchange rate in both conventional and unconventional periods; (ii) however, there is substancial heterogeneity in monetary policy shocks over time and their effects depend on the way they affect agents'expectations; (iii) we find favorable evidence to Dornbusch's (1976) overshooting hypothesis; (iv) changes in expected real interest rates play an important role in the transmission of monetary policy shocks.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1639
- dc.identifier.citation Journal of International Economics, 118, 2019, 419-447
- dc.identifier.uri http://hdl.handle.net/10230/44716
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1639
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword exchange rates
- dc.subject.keyword zero-lower bound
- dc.subject.keyword unconventional monetary policy
- dc.subject.keyword forward guidance.
- dc.subject.keyword Macroeconomics and International Economics
- dc.subject.keyword Statistics, Econometrics and Quantitative Methods
- dc.title The effects of conventional and unconventional monetary policy on exchange rates
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper