Central Bank Communication and Exchange Rate Volatility: A GARCH Analysis
AbstractWe examine the effects of the Czech National Bank communication, macroeconomic news and interest rate differential on exchange rate volatility using generalized autoregressive conditional heteroscedasticity model. Our results suggest that central bank communication has a calming effect on exchange rate volatility. The timing of central bank communication seems to matter, too, as financial markets respond more to the communication before the policy meetings than after them. Next, macroeconomic news releases are found to reduce exchange rate volatility, while interest rate differential seems to increase it.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp962.
Date of creation: 01 Jul 2009
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central bank communication; exchange rate; GARCH;
Other versions of this item:
- Radovan Fiser & Roman Horvath, 2010. "Central bank communication and exchange rate volatility: a GARCH analysis," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(1), pages 25-31.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-CBA-2010-04-04 (Central Banking)
- NEP-IFN-2010-04-04 (International Finance)
- NEP-MAC-2010-04-04 (Macroeconomics)
- NEP-MON-2010-04-04 (Monetary Economics)
- NEP-TRA-2010-04-04 (Transition Economics)
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