Central Bank Communication and Exchange Rate Volatility: A GARCH Analysis

Roman Horvath and Radovan Fiser

No wp962, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We examine the effects of the Czech National Bank communication, macroeconomic news and interest rate differential on exchange rate volatility using generalized autoregressive conditional heteroscedasticity model. Our results suggest that central bank communication has a calming effect on exchange rate volatility. The timing of central bank communication seems to matter, too, as financial markets respond more to the communication before the policy meetings than after them. Next, macroeconomic news releases are found to reduce exchange rate volatility, while interest rate differential seems to increase it.

Keywords: central bank communication; exchange rate; GARCH (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
Pages: pages
Date: 2009-07-01
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-tra
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Citations: View citations in EconPapers (1)

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Journal Article: Central bank communication and exchange rate volatility: a GARCH analysis (2010)
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