How does Monetary Policy Respond to Exchange Rate Movements?: New International Evidence

• Autores: Hilde C. Bjørnland, Jørn I. Halvorsen
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 76, Nº. 2, 2014, págs. 208-232
• Idioma: inglés
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• Resumen

  • This article analyzes how monetary policy has responded to exchange rate movements in six open economies, paying particular attention to the two-way interaction between monetary policy and the exchange rate. We address this issue using a structural VAR model that is identified using a combination of sign and short-term (zero) restrictions. Doing so we find that, while there is a instantaneous reaction in the exchange rate following a monetary policy shock in all countries, monetary policy responds significantly on impact to an exchange rate shock in only four of the six countries.