Does a big bazooka matter? Quantitative easing policies and exchange rates
Johannes Gräb () and
Arnaud Mehl ()
Research Bulletin, 2020, vol. 76
What does quantitative easing (QE) really mean for the exchange rate? This article explains how the relevant effects can be estimated using a statistical methodology derived from theory. The results suggest that QE has large and persistent effects on the USD/EUR exchange rate, mainly through shifts in exchange rate risk and short-term interest rates between the two currencies. Changes in expectations about the future monetary policy stance, reflecting the “signalling channel” of monetary policy, also affect how the USD/EUR exchange rate responds to QE. JEL Classification: F41
Keywords: QE dynamic effects; Signalling channels of QE; UIP and CIP deviations (search for similar items in EconPapers)
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Journal Article: Does a big bazooka matter? Quantitative easing policies and exchange rates (2021)
Working Paper: Does a Big Bazooka Matter? Quantitative Easing Policies and Exchange Rates (2020)
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