The High-Frequency Response of the EUR-USD Exchange Rate to ECB Communication

We investigate the impact of the European Central Bank's monetary policy communication during the press conference held after the monthly Governing Council meeting on the EUR-USD exchange rate in high frequency. Based on the method of Content Analysis, we construct communication indicators for...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2010-10, Vol.42 (7), p.1391-1417
Main Authors: CONRAD, CHRISTIAN, LAMLA, MICHAEL J.
Format: Article
Language:English
Subjects:
American dollar
Bank credit
C22
central bank communication
Central banks
Communication
Content analysis
Credit
E52
E58
Economic activity
Economic expectations
Euro
European Central Bank
exchange rate
Exchange rates
expectations
F31
Foreign exchange rates
Impact analysis
Inflation rates
Interest rates
long memory GARCH processes
Macroeconomics
Monetary policy
monetary policy announcements
Money
Press releases
Prices
Pricing
Studies
Taylor rules
Western Europe
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Summary:We investigate the impact of the European Central Bank's monetary policy communication during the press conference held after the monthly Governing Council meeting on the EUR-USD exchange rate in high frequency. Based on the method of Content Analysis, we construct communication indicators for the introductory statement and find that communication with respect to future price developments is most relevant. In response to statements about increasing risks to price stability the EUR appreciates on impact. To the contrary, communication about economic activity and monetary aggregates does not generate significant exchange rate reactions.
ISSN:0022-2879
1538-4616
DOI:10.1111/j.1538-4616.2010.00346.x