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

Mylonidis, Nikolaos and Stamopoulou, Ioanna (2011): The role of monetary policy in managing the euro - dollar exchange rate.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange rates; Monetary model; Cointegration; Impulse response functions
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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