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ECB monetary policy and the euro exchange rate

Author

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  • Martina Cecioni

    (Bank of Italy)

Abstract

The paper provides empirical evidence on the effects of ECB conventional and unconventional monetary policy on the euro exchange rate, focusing on the period from January 2013 to September 2017. Innovations to conventional and unconventional monetary policies are identified through changes in, respectively, short- and long-term interest rates immediately after Governing Council meetings. Both types of measures contributed to the depreciation of the euro from mid-2014; surprises associated with conventional measures had a stronger and more persistent effect than those associated with unconventional ones. Time-varying estimates of the effects of conventional surprises since 1999 show that the responsiveness of exchange rates to monetary news increased markedly from 2013. State-dependence analysis finds that the exchange rate became more sensitive to monetary policy when the ECB adopted a policy of negative interest rates and when conventional and unconventional monetary surprises moved in the same direction.

Suggested Citation

  • Martina Cecioni, 2018. "ECB monetary policy and the euro exchange rate," Temi di discussione (Economic working papers) 1172, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1172_18
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    References listed on IDEAS

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    Cited by:

    1. Andrea De Polis & Mario Pietrunti, 2019. "Exchange rate dynamics and unconventional monetary policies: it�s all in the shadows," Temi di discussione (Economic working papers) 1231, Bank of Italy, Economic Research and International Relations Area.
    2. Hongcheng Ding & Xuanze Zhao & Ruiting Deng & Shamsul Nahar Abdullah & Deshinta Arrova Dewi, 2024. "EUR-USD Exchange Rate Forecasting Based on Information Fusion with Large Language Models and Deep Learning Methods," Papers 2408.13214, arXiv.org, revised Jun 2025.
    3. Stefano Neri & Stefano Siviero, 2019. "The non-standard monetary policy measures of the ECB: motivations, effectiveness and risks," Questioni di Economia e Finanza (Occasional Papers) 486, Bank of Italy, Economic Research and International Relations Area.
    4. Pierpaolo Benigno & Paolo Canofari & Giovanni Di Bartolomeo & Marcello Messori, 2023. "The ECB's asset purchase programme: Theory, effects, and risks," Journal of Economic Surveys, Wiley Blackwell, vol. 37(3), pages 890-914, July.
    5. Auer, Simone & Bernardini, Marco & Cecioni, Martina, 2021. "Corporate leverage and monetary policy effectiveness in the euro area," European Economic Review, Elsevier, vol. 140(C).

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    JEL classification:

    • 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

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