The impact of US monetary policy on managed exchange rates and currency peg regimes

Ingmar Roevekamp

Journal of International Money and Finance, 2021, vol. 110, issue C

Abstract: I study the impact of US monetary policy on managed exchange rates and currency peg regimes by analyzing the pricing of American Depositary Receipts (ADRs) around FOMC meetings. I identify a significant negative impact of US monetary surprises on abnormal ADR returns for currencies that are managed, which reflects changes in these currencies’ fundamental values due to US monetary policy shocks. In line with currency crises models of interest rate defence like Lahiri and Végh (2007), positive US monetary surprises increase the breakdown probability of currency pegs of countries characterized by low real GDP growth, high fiscal deficits and a weak domestic banking sector.

Keywords: American depositary receipts; Currency crises; Exchange rates; FOMC meetings; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 F31 G01 G12 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560620302229
Full text for ScienceDirect subscribers only

Related works:
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:eee:jimfin:v:110:y:2021:i:c:s0261560620302229

DOI: 10.1016/j.jimonfin.2020.102266

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().