Monetary policy's rising FX impact in the era of ultra-low rates

Massimo Ferrari Minesso, Jonathan Kearns and Andreas Schrimpf

No 626, BIS Working Papers from Bank for International Settlements

Abstract: We show that the FX impact of monetary policy has been growing significantly. We use a high-frequency event study of the joint response of fixed income instruments and exchange rates to monetary policy news from seven major central banks spanning 2004-2015. News affecting short maturity bonds have the strongest impact, highlighting the relevance of communication regarding the path of future policy. The FX impact of monetary policy is state-dependent and is stronger the lower the level of interest rates. A greater adjustment burden falls onto the exchange rate, as rates are increasingly constrained by the effective lower bound.

Keywords: Rates; Unconventional Monetary Policy; Forward Guidance; Event Study; High Frequency Data (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-04
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.bis.org/publ/work626.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work626.htm (text/html)

Related works:
Journal Article: Monetary policy’s rising FX impact in the era of ultra-low rates (2021)
Working Paper: Monetary policy's rising FX impact in the era of ultra-low rates (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:626

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().