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Intraday Exchange Rate Dynamics and Monetary Policy

Author

Listed:
  • Aurélie Boubel

    (EPEE, Université d'Evry-Val-d'Essonne, France)

  • Richard Topol

    (CNRS and CREA, Ecole Polytechnique, France)

Abstract

In this paper, we investigate whether there is a simple relation between an indicator of monetary policy (here, interest rates) and exchange rate volatility. We use an intraday exchange rate model which relies on interactions between four kinds of agents (in domestic and foreign countries) : central banks, speculators, commercial traders and commercial banks. Central banks intervene exogenously in the model, they announce the level of interest rates at every beginning of the day in the Over-The-Counter market. The results suggest an implicit relation between the interest rates and the conditional variance of the exchange rate.

Suggested Citation

  • Aurélie Boubel & Richard Topol, 1999. "Intraday Exchange Rate Dynamics and Monetary Policy," Documents de recherche 99-20, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    • Handle: RePEc:eve:wpaper:99-20
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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