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Explaining Movements in the NZ Dollar - Central Bank Communication and the Surprise Element in Monetary Policy?

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Author Info
Özer Karagedikli
Pierre L. Siklos (Reserve Bank of New Zealand)

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Abstract

We conduct a high frequency event analysis to estimate the effects of monetary policy surprises, data surprises, and central bank verbal statements on the New Zealand-US dollar and the New Zealand-Australian dollar exchange rates. We find data surprises and monetary policy surprises have significant and large effects on exchange rate movements. More importantly, RBNZ interest rate decisions have a largely permanent impact on the exchange rate. Significantly, the impact of the published interest rate track seems to explain some 10 per cent additional variation in the exchange rate.

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File URL: http://www.rbnz.govt.nz/research/discusspapers/dp08_02.pdf
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Publisher Info
Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2008/02.

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Length: 42 p.
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:nzb:nzbdps:2008/02

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Web page: http://www.rbnz.govt.nz
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Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pierre L. Siklos & Martin T. Bohl, 2007. "Policy Words and Policy Deeds: The ECB and the Euro," Working Paper Series 35-07, Rimini Centre for Economic Analysis, revised Jul 2007. [Downloadable!]
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  2. Sharon McCaw & Satish Ranchhod, 2002. "The Reserve Bank's forecasting performance," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, December. [Downloadable!]
  3. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2005. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets," NBER Working Papers 11312, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Ehrmann, Michael & Fratzscher, Marcel, 2003. "Monetary Policy Announcements and Money Markets: A Transatlantic Perspective," International Finance, Blackwell Publishing, vol. 6(3), pages 309-28, Winter. [Downloadable!] (restricted)
  5. Piazzesi, Monika & Swanson, Eric T., 2008. "Futures prices as risk-adjusted forecasts of monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 677-691, May. [Downloadable!] (restricted)
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  6. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Claus Brand & Daniel Buncic & Jarkko Turunen, 2008. "The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve," Discussion Papers 2008-11, School of Economics, The University of New South Wales. [Downloadable!]
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  8. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction Of Monetary Policy To The Stock Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 639-669, May. [Downloadable!] (restricted)
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  9. Magnus Andersson, 2007. "Using intraday data to gauge financial market responses to Fed and ECB monetary policy decisions," Working Paper Series 726, European Central Bank. [Downloadable!]
  10. Michael Ehrmann & Marcel Fratzscher, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank. [Downloadable!]
  11. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November. [Downloadable!] (restricted)
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  12. Ramchander, Sanjay & Simpson, Marc W. & Chaudhry, Mukesh K., 2005. "The influence of macroeconomic news on term and quality spreads," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(1), pages 84-102, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Özer Karagedikli & Rishab Sethi & Christie Smith & Aaron Drew, 2008. "Changes in the transmission mechanism of monetary policy in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/03, Reserve Bank of New Zealand. [Downloadable!]
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This page was last updated on 2008-11-9.

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