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Federal Reserve Bank of Boston
Public Policy Brief
Domestic and foreign announcements on unconventional monetary policy and exchange rates
Federico J. Diez
Ignacio Presno
Abstract

This brief studies the effects that announcements about unconventional monetary policies (large-scale asset purchases, refinancing operations, and forward guidance) have on nominal exchange rates. To this end, the authors use high-frequency intra-daily data and look at the variations in government future yields and in nominal exchange rates over a narrow window around the time of the announcements. They find that expansionary monetary policy shocks embedded in announcements made by the Federal Reserve depreciate the U. S. dollar. In contrast, the authors also find that similar unexpected expansionary announcements by foreign central banks result in an appreciation of the U. S. dollar.


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Federico J. Diez & Ignacio Presno, "Domestic and foreign announcements on unconventional monetary policy and exchange rates" , Federal Reserve Bank of Boston, Public Policy Brief, number 7, 2013.
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Keywords: monetary policy; quantitative easing; exchange rates
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