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Exchange Rates and FOMC Days

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  • SEUNG CHAN AHN
  • MICHAEL MELVIN

Abstract

Federal Open Market Committee (FOMC) meeting days provide a natural laboratory for exploring the effects of policy uncertainty and learning on exchange rate determination. A reasonable hypothesis is that the meeting outcomes are price-relevant public information associated with a switch to an "informed-trading state." Evidence is provided by intradaily exchange rates for 10 FOMC meetings. A particularly interesting finding is that the informed-trading regime tends to emerge during the time that the FOMC meets. An extensive search of public news indicates that the informed trading cannot be explained as the response to public information. Copyright 2007 The Ohio State University.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 39 (2007)
Issue (Month): 5 (08)
Pages: 1245-1266

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Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:5:p:1245-1266

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Gregory H. Bauer & Clara Vega, 2006. "The monetary origins of asymmetric information in international equity markets," International Finance Discussion Papers 872, Board of Governors of the Federal Reserve System (U.S.).
  2. Kevin Krieger & Nathan Mauck & Denghui Chen, 2012. "VIX changes and derivative returns on FOMC meeting days," Financial Markets and Portfolio Management, Springer, vol. 26(3), pages 315-331, September.
  3. Michael Melvin & Christian Saborowski & Michael Sager & Mark P. Taylor, 2009. "Bank of England Interest Rate Announcements and the Foreign Exchange Market," CESifo Working Paper Series 2613, CESifo Group Munich.
  4. Andreas M. Fischer & Angelo Ranaldo, 2008. "Does FOMC News Increase Global FX Trading?," Working Papers 2008-09, Swiss National Bank.

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