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The role of monetary policy in managing the euro - dollar exchange rate

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  • Mylonidis, Nikolaos
  • Stamopoulou, Ioanna

Abstract

The US Federal Reserve’s new relaxed monetary policy (the so-called quantitative easing) has triggered controversy among economists and policy makers about its effectiveness. This paper investigates the role of monetary policy in managing the euro – dollar exchange rate via alternative cointegration tests and impulse response functions. It is found that monetary fundamentals have neither long- nor short-run impact on the exchange rate. This implies that the Fed’s quantitative easing schemes are unlikely to have any significant impact on the euro – dollar rate.

Suggested Citation

  • Mylonidis, Nikolaos & Stamopoulou, Ioanna, 2011. "The role of monetary policy in managing the euro - dollar exchange rate," MPRA Paper 29291, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:29291
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Exchange rates; Monetary model; Cointegration; Impulse response functions;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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