Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data / Jon Faust, John H. Rogers, Eric Swanson, Jonathan H. Wright.

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Faust, Jon

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9660.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy decision on financial variables, such as the exchange rate and the foreign interest rate. We show how this information can be used to achieve identification without having to make the usual strong assumption of a recursive ordering.

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Working Paper	Biblioteca Digital	Colección NBER	nber w9660 (Browse shelf(Opens below))	Not For Loan

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April 2003.

This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy decision on financial variables, such as the exchange rate and the foreign interest rate. We show how this information can be used to achieve identification without having to make the usual strong assumption of a recursive ordering.