The effects of monetary policy shocks on exchange rates

A structural vector error correction model approach

Kyungho Jang, Masao Ogaki

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

This paper investigates the effects of shocks to US monetary policy on the dollar-yen exchange rate, using structural Vector error correction model (VECM) methods with long-run restrictions. We compare our estimates of the impulse responses with those based on levels Vector autoregression (VAR) with standard recursive order restrictions. The empirical results based on the long-run restrictions are found to be more consistent with standard models of exchange rate determination than the results based on the recursive order restrictions.

Original languageEnglish
Pages (from-to)99-114
Number of pages16
JournalJournal of the Japanese and International Economies
Volume18
Issue number1
DOIs
Publication statusPublished - 2004 Mar
Externally publishedYes

Fingerprint

monetary policy
rate of exchange
dollar
Vector error correction model
Long-run restrictions
Monetary policy shocks
Exchange rates
Vector autoregression
Exchange rate determination
Impulse response
Monetary policy
Empirical results

Keywords

  • Cointegration
  • Identification
  • Impulse response
  • Long-run restriction
  • Monetary policy shock
  • Short-run restriction
  • Vector error correction model

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

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abstract = "This paper investigates the effects of shocks to US monetary policy on the dollar-yen exchange rate, using structural Vector error correction model (VECM) methods with long-run restrictions. We compare our estimates of the impulse responses with those based on levels Vector autoregression (VAR) with standard recursive order restrictions. The empirical results based on the long-run restrictions are found to be more consistent with standard models of exchange rate determination than the results based on the recursive order restrictions.",
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