The High-Frequency Response of the Rand-Dollar rate to Inflation Surprises
Greg Farrell (),
Shakill Hassan and
Nicola Viegi ()
No 279, Working Papers from Economic Research Southern Africa
We examine the high-frequency response of the rand-dollar nominal rate within ten-minute intervals around five minutes before, five minutes after) official inflation announcements, and show that the rand appreciates (respectively, depreciates) on impact when inflation is higher (respectively, lower) than expected. The effect only applies after the adoption of inflation targeting, and is stronger for good news. Our findings are rationalisable by the belief, among market participants, in a credible (though perhaps not particularly aggressive) inflation targeting policy in South Africa; and can be used to monitor changes in currency market perceptions about the monetary policy regime.
Keywords: high-frequency exchange rates; inflflation surprises; Taylor rules; inflflation targeting; credibility. (search for similar items in EconPapers)
JEL-codes: E31 E52 F30 F31 (search for similar items in EconPapers)
Pages: 16 pages
New Economics Papers: this item is included in nep-afr, nep-mac, nep-mon and nep-mst
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Working Paper: The High-Frequency Response of the Rand-Dollar Rate to Inflation Surprises (2012)
Working Paper: The HighFrequency Response of the RandDollar Rate to Inflation Surprises (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:rza:wpaper:279
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