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Impact of the Central Bank's Communication on FX Market Dynamics

Author

Listed:
  • Tetiana Yukhymenko

    (National Bank of Ukraine)

  • Oleh Sorochan

    (National Bank of Ukraine)

Abstract

This study explores the impact of central bank communications on FX market dynamics. Our main results suggest that the NBU's statements and press releases on monetary policy issues do indeed matter. We find that exchange rate movements and volatility are negatively correlated with the volumes of publications by the NBU on its official website. However, this effect is noticeably larger for volatility than for exchange rate changes. The impact of communications on FX developments is strongest a week after a news release, and it persists further. Furthermore, these indicators turn out to be more sensitive to monetary policy announcements than NBU updates overall.

Suggested Citation

  • Tetiana Yukhymenko & Oleh Sorochan, 2023. "Impact of the Central Bank's Communication on FX Market Dynamics," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 255, pages 4-21.
    • Handle: RePEc:ukb:journl:y:2023:i:255:p:4-21
    DOI: 10.26531/vnbu2023.255.01
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    References listed on IDEAS

    as
    1. Carlo Rosa, 2013. "The financial market effect of FOMC minutes," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 67-81.
    2. Iris Biefang-Frisancho Mariscal & Peter Howells, 2007. "Central bank communication, transparency and interest rate volatility: Evidence from the USA," Working Papers 0704, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Ge Gao & Alex Nikolsko‐Rzhevskyy & Oleksandr Talavera, 2023. "Can central banks be heard over the sound of gunfire?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(S1), pages 183-203, December.
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    Keywords

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    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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