| By: |
Christian Conrad (Department of Management, Technology, and Economics, ETH Zurich);
Michael J. Lamla (Department of Management, Technology, and Economics, ETH Zurich) |
| Abstract: |
We investigate the impact of the European Central Bank's monetary policy an-
nouncements on the level and volatility of the EUR-US Dollar exchange rate em-
ploying an AR-FIGARCH specification. Using high-frequency data we estimate the
individual and complementary effects of the release of the interest rate
decision, the ECB's introductory statement and the question and answer
session. Surprise interest rate changes explain the movements in the exchange
rate immediately after press release. During the introductory statement,
communication with respect to future price developments is most relevant and
has two important functions: (i) it explains the previously announced decision
and (ii) it serves as a guide for the future path of monetary policy. |
| Keywords: |
European Central Bank, monetary policy announcements, communication, exchange rate, expectations, long memory GARCH processes |
| JEL: |
C22 E52 E58 F31 |
| Date: |
2007–09 |
| URL: |
http://d.repec.org/n?u=RePEc:kof:wpskof:07-174&r=mst |