The Volatility of the Euro/Dollar Exchange Rate: Empirical Evidence and Policy Implications

Marco Tronzano ()
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Marco Tronzano: Università di Genova; Facoltà di Economia; Dipartimento di Economia e Metodi Quantitativi, Postal: Via Balbi 5 - 16126 Genova, Italy, http://www.unige.it/

Economia Internazionale / International Economics, 2008, vol. 61, issue 2-3, 569-596

Abstract: examines the volatility of the U$/Euro exchange rate during the period 1999-2005. According to our estimates, the degree of volatility persistence, although statistically significant, is rather low; moreover, there is no evidence of an asymmetric response of predictable volatility to past innovations. Since this evidence excludes a relevant component of ‘nonfundamental’ exchange rate volatility, the main policy implication is that the ECB ‘benign neglect’ approach towards the Euro has been entirely appropriate. This conclusion is in line with the current consensus view emerging from the literature on inflation targeting and monetary policy rules in open economies.

Keywords: Exchange Rate Volatility; Garch Models; Monetary Policy Rules; ECB; International Policy Coordination (search for similar items in EconPapers)
JEL-codes: E52 F31 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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