Assessing the Volatility of the Euro on Foreign Exchange Markets: Further Empirical Evidence and Policy Implications

Marco Tronzano ()
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Marco Tronzano: Università degli Studi di Genova, Dipartimento di Economia e Metodi Quantitativi, Postal: Darsena - Via Vivaldi, 5 - 16126 Genova - ITALY, http://www.unige.it/

Economia Internazionale / International Economics, 2009, vol. 62, issue 1, 103-131

Abstract: This paper assesses the validity of the ECB ‘benign neglect’ approach towards foreign exchange markets. I extend the analysis performed in Tronzano (2008) on the U$/Euro rate, applying a wide range of conditional volatility models to Yen/Euro data from 1999 to 2007. An overall evaluation of results, in the light of the literature on the welfare effects of nominal exchange rate volatility and optimal rules for open economies, reveals that the ECB inwardoriented approach was fully appropriate. In line with Tronzano (2008), this paper excludes therefore substantial welfare gains from a policy incorporating a systematic reaction to exchange rate dynamics.

Keywords: Exchange Rate Volatility; Garch Models; Monetary Policy Rules; ECB; Yen/Euro Exchange Rate (search for similar items in EconPapers)
JEL-codes: E52 F31 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0016

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