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The Euro and Monetary Policy Transparency

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Author Info

  • Guglielmo Maria Caporale

    ()
    (Centre for Monetary and Financial Economics, South Bank University, London)

  • Andrea Cipollini

    (South Bank University, London)

Abstract

This paper focuses on a possible explanation for the weakness of the euro, namely the lack of transparency of the European Central Bank's (ECB) monetary policy. In order to obtain a time-varying measure of monetary policy uncertainty in both the U.S. and Euroland, we estimate a Stochastic Volatility model using policy-adjusted short-term interest rates. We also analyze directly the impact of higher uncertainty on the euro-dollar exchange rate. The empirical findings are in line with those of other studies, and show that the U.S. Fed is more transparent than the ECB. This results in higher volatility of European interest rates, capital outflows, and a weaker euro vis-a-vis the U.S. dollar.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume28/V28N1P59_70.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 28 (2002)
Issue (Month): 1 (Winter)
Pages: 59-70

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Handle: RePEc:eej:eeconj:v:28:y:2002:i:1:p:59-70

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Web page: http://www.ramapo.edu/eea/journal.html
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Related research

Keywords: Exchange Rates; Interest Rates; Interest; Monetary Policy; Monetary; Policy;

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Cited by:
  1. Iris Biefang-Frisancho Mariscal & Peter Howells, 2007. "Monetary Policy Transparency in the UK: The Impact of Independence and Inflation Targeting," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(5), pages 603-617.
  2. Mandler, Martin, 2007. "Decomposing Federal Funds Rate forecast uncertainty using real-time data," MPRA Paper 13498, University Library of Munich, Germany, revised Jan 2009.
  3. Mandler, Martin, 2007. "The Taylor rule and interest rate uncertainty in the U.S. 1955-2006," MPRA Paper 2340, University Library of Munich, Germany.

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