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New evidence on the effects of US monetary policy on exchange rates

Kalyvitis, Sarantis and Michaelides, Alexander (2001) New evidence on the effects of US monetary policy on exchange rates. Economics Letters, 71 (2). pp. 255-263. ISSN 0165-1765

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Identification Number: 10.1016/S0165-1765(01)00375-5


We examine the impact of US monetary policy shocks on exchange rates using the monetary policy indicator proposed by Bernanke and Mihov [Quarterly Journal of Economics, 113 (1998) 869–902]. We find evidence for instantaneous, rather than delayed, US dollar overshooting after a monetary shock when relative output and relative prices are included in the VAR specification. The forward premium puzzle persists due to the interest rate differential response.

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Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
Date Deposited: 29 Jun 2006
Last Modified: 15 May 2024 23:55

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