The High-Frequency Response of the EUR-US Dollar Exchange Rate to ECB Communication
KOF Working Paper No. 174
34 Pages Posted: 25 Sep 2007 Last revised: 9 May 2013
Date Written: September 1, 2007
Abstract
We investigate the impact of the European Central Bank’s monetary policy communication during the press conference held after the monthly Governing Council meeting on the EUR-USD exchange rate in high-frequency. Based on the method of Content Analysis we construct communication indicators for the introductory statement and find that communication with respect to future price developments is most relevant. In response to statements about increasing risks to price stability the EUR appreciates on impact. To the contrary, communication about economic activity and monetary aggregates does not generate significant exchange rate reactions.
Keywords: Central bank communication, exchange rate, expectations, long memory GARCH processes, monetary policy announcements, Taylor rules.
JEL Classification: C22, E52, E58, F31
Suggested Citation: Suggested Citation
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