Central bank communication and exchange rate volatility: a GARCH analysis

Radovan Fiser and Roman Horvath

Macroeconomics and Finance in Emerging Market Economies, 2010, vol. 3, issue 1, 25-31

Abstract: We examine the effects of the Czech National Bank communication, macroeconomic news and interest rate differential on exchange rate volatility using generalized autoregressive conditional heteroscedasticity model. Our results suggest that central bank communication has a calming effect on exchange rate volatility. The timing of central bank communication seems to matter, too, as financial markets respond more to the communication before the policy meetings than after them. Next, macroeconomic news releases are found to reduce exchange rate volatility, while interest rate differential seems to increase it.

Keywords: central bank communication; exchange rate; GARCH (search for similar items in EconPapers)
Date: 2010
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Working Paper: Central Bank Communication and Exchange Rate Volatility: A GARCH Analysis (2009)
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DOI: 10.1080/17520840903498099

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