SIGN IN
Email
This field is required Password This field is required Sign in
Remember me
Forgot ID or Password?
|
||
Exchange Rates and Monetary Policy UncertaintyPhilippe MuellerLondon School of Economics & Political Science (LSE) - Department of Finance Alireza Tahbaz-SalehiColumbia Business School - Decision Risk and Operations Andrea VedolinLondon School of Economics and Political Science June 20, 2016 Journal of Finance, Forthcoming Columbia Business School Research Paper No. 16-3 Abstract: We document that a trading strategy that is short the U.S. dollar and long other currencies exhibits significantly larger excess returns on days with scheduled Federal Open Market Committee (FOMC) announcements. We also show that these excess returns (i) are higher for currencies with higher interest rate differentials vis-a-vis the U.S.; (ii) increase with uncertainty about monetary policy; and (iii) intensify when the Federal Reserve adopts a policy of monetary easing. We interpret these excess returns as a compensation for monetary policy uncertainty within a parsimonious model of constrained financiers who intermediate global demand for currencies.
Number of Pages in PDF File: 42 Keywords: Monetary Policy, Foreign Exchange, Uncertainty JEL Classification: E52, E58, F31 Date posted: December 20, 2015 ; Last revised: September 24, 2016Suggested CitationContact Information
|
|
|||||||||||||||||||||
