Article ID Journal Published Year Pages File Type
964431 Journal of International Money and Finance 2006 22 Pages PDF
Abstract

Exchange rate communication has come to play an increasingly important role as a policy tool for monetary authorities over the past decade. The paper assesses the strategies and the long-term effectiveness of communication as well as actual interventions. The empirical results for the G3 economies indicate that communication has not only exhibited a significant contemporaneous effect on exchange rates, but also has moved forward exchange rates up to a horizon of 6 months in the desired direction. Moreover, communication is found to reduce exchange rate volatility and uncertainty whereas actual interventions tend to raise it. Overall this underlines a key difference between these two policy tools and suggests that communication tends to be a fairly effective policy tool over the medium-term.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
,