The Effect of Target Federal Funds Rate Changes on the Foreign Exchange Markets: An Event Study Approach

Alan T. Wang, Shu-Hsun Hung and I-Ming Jiang

Journal of Applied Finance & Banking, 2013, vol. 3, issue 3, 9

Abstract: This paper examines the effect of target Federal funds rate changes on major five foreign exchange markets: Canada, Australia, Euro, Japan and the UK during the period from 2000 to 2007. Two different approaches of Rai, Seth and Mohanty (2007) and the event study of Brown and Warner (1980, 1985) are used in our paper. The results show that event-study method yields a stronger relationship between the U.S. Federal funds rate and exchange rates. On average, evidences are consistent with our expectations: federal funds rate increases (decreases) are associated with the U.S. dollar appreciation (depreciation). For cross-sectional analysis of individual exchange rates, cumulated abnormal returns suggest that yen is the only currency strongly affected by target Federal funds rate changes.

Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.scienpress.com/Upload/JAFB%2fVol%203_3_9.pdf (application/pdf)

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:spt:apfiba:v:3:y:2013:i:3:f:3_3_9

Access Statistics for this article

More articles in Journal of Applied Finance & Banking from SCIENPRESS Ltd
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().