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THE CHANGING INFLUENCE OF MONEY AND MONETARY POLICY ON EXCHANGE RATES
Author(s) -
KEARNEY ADRIENNE A.
Publication year - 1995
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1995.tb01857.x
Subject(s) - economics , monetary economics , monetary policy , exchange rate , money supply , linkage (software) , money market , biochemistry , chemistry , gene
This paper focuses on an old issue—the linkage between money announcements and the exchange rate. It shows that the magnitude of the time‐varying response of the spot exchange rate to an unanticipated money announcement is mainly driven by agents' expectations of the Federal Reserve's time‐varying response to the deviation of the actual money supply from a prespecified target. The inference is, the magnitude of the exchange rate's response to economic announcements depends on market participants' expectations about the announcements and the Fed's probable monetary policy response.