Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data

47 Pages Posted: 27 Apr 2003

See all articles by Jon Faust

Jon Faust

Board of Governors of the Federal Reserve System

John H. Rogers

Board of Governors of the Federal Reserve System

Eric T. Swanson

University of California, Irvine - Department of Economics

Jonathan H. Wright

Johns Hopkins University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2003

Abstract

This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy decision on financial variables, such as the exchange rate and the foreign interest rate. We show how this information can be used to achieve identification without having to make the usual strong assumption of a recursive ordering.

Suggested Citation

Faust, Jon and Rogers, John H. and Swanson, Eric T. and Wright, Jonathan H., Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data (April 2003). NBER Working Paper No. w9660, Available at SSRN: https://ssrn.com/abstract=398563

Jon Faust (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2328 (Phone)
202-736-5638 (Fax)

John H. Rogers

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Eric T. Swanson

University of California, Irvine - Department of Economics ( email )

University of California, Irvine
3151 Social Science Plaza
Irvine, CA 92697-5100
United States
(949) 824-8305 (Phone)

HOME PAGE: http://www.ericswanson.org

Jonathan H. Wright

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
39
Abstract Views
1,045
PlumX Metrics