The Euro and Monetary Policy Transparency
AbstractThis 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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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 28 (2002)
Issue (Month): 1 (Winter)
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Exchange Rates; Interest Rates; Interest; Monetary Policy; Monetary; Policy;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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- 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.
- Iris Biefang-Frisancho Mariscal & Peter Howells, 2006. "Monetary Policy Transparency in the UK:The Impact of Independence and Inflation Targeting," Working Papers 0601, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
- Mandler, Martin, 2007. "The Taylor rule and interest rate uncertainty in the U.S. 1955-2006," MPRA Paper 2340, University Library of Munich, Germany.
- Martin Mandler, 2009.
"Decomposing Federal Funds Rate forecast uncertainty using real-time data,"
MAGKS Papers on Economics
200947, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Mandler, Martin, 2007. "Decomposing Federal Funds Rate forecast uncertainty using real-time data," MPRA Paper 13498, University Library of Munich, Germany, revised Jan 2009.
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