Discount rate changes and the foreign exchange market
AbstractChanges in the discount rate can have an associated announcement effect on the foreign exchange value of the dollar only if these changes are not anticipated by the market. This paper provides evidence to support this contention. Specifically, discount rate changes made for reasons other than technical adjustments have not been anticipated fully and consequently, their announcement has had a significant impact on the dollar's exchange rate. Furthermore, results are obtained that support the hypothesis that unanticipated discount rate changes alter the expectation of the rate of future inflation.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 3 (1984)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- Dallas S. Batten & Daniel L. Thornton, 1983. "Discount rate changes and the foreign exchange market," Working Papers 1983-016, Federal Reserve Bank of St. Louis.
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- Daniel L. Thornton, 2000.
"The relationship between the federal funds rate and the Fed's federal funds rate target: is it open market or open mouth operations?,"
1999-022, Federal Reserve Bank of St. Louis.
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- Antulio N. Bomfim & Vincent R. Reinhart, 2000. "Making news: financial market effects of Federal Reserve disclosure practices," Finance and Economics Discussion Series 2000-14, Board of Governors of the Federal Reserve System (U.S.).
- Mahajan, Arvind & Wagner, Andrew J., 1999. "Nonlinear dynamics in foreign exchange rates," Global Finance Journal, Elsevier, vol. 10(1), pages 1-23.
- Daniel L. Thornton, 1996. "Discount rate policies of five Federal Reserve Chairmen," Working Papers 1996-001, Federal Reserve Bank of St. Louis.
- Michael W. Klein & Eric S. Rosengren, 1991. "Foreign exchange intervention as a signal of monetary policy," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-50.
- Marc Simpson & Sanjay Ramchander & James Webb, 2007. "The Asymmetric Response of Equity REIT Returns to Inflation," The Journal of Real Estate Finance and Economics, Springer, vol. 34(4), pages 513-529, May.
- Thornton, Daniel L., 2004. "The Fed and short-term rates: Is it open market operations, open mouth operations or interest rate smoothing?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 475-498, March.
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