The Impact of Monetary Policy on the Exchange Rate: A Study Using Intraday Data

Jonathan Kearns and Philip Manners ()

International Journal of Central Banking, 2006, vol. 2, issue 4

Abstract: We investigate the impact of monetary policy on the exchange rate using an event study with intraday data for four countries. Carefully selecting the sample periods ensures that the policy change is exogenous to the exchange rate. An unanticipated tightening of 25 basis points leads to a rapid appreciation of around 0.35 percent. We also show that the impact depends on how the surprise affects expectations of future monetary policy. If expectations of future policy are revised by the full amount of the surprise, then the impact on the exchange rate is larger (0.4 percent) than if the surprise only brings forward an anticipated change in policy (0.2 percent).

JEL-codes: F31 G14 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (47)

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Working Paper: The Impact of Monetary Policy on the Exchange Rate: A Study Using Intraday Data (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2006:q:4:a:6

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