How does Monetary Policy Respond to Exchange Rate Movements? New International Evidence

Hilde Bjørnland () and Jørn I. Halvorsen

Oxford Bulletin of Economics and Statistics, 2014, vol. 76, issue 2, 208-232

Abstract: type="main" xml:lang="en">

This article analyzes how monetary policy has responded to exchange rate movements in six open economies, paying particular attention to the two-way interaction between monetary policy and the exchange rate. We address this issue using a structural VAR model that is identified using a combination of sign and short-term (zero) restrictions. Doing so we find that, while there is a instantaneous reaction in the exchange rate following a monetary policy shock in all countries, monetary policy responds significantly on impact to an exchange rate shock in only four of the six countries.

Date: 2014
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Working Paper: How does monetary policy respond to exchange rate movements? New international evidence (2010)
Working Paper: How does monetary policy respond to exchange rate movements? New international evidence (2008)
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