NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Jon Faust, John H. Rogers, Eric Swanson, Jonathan H. Wright

NBER Working Paper No. 9660
Issued in April 2003
NBER Program(s):   IFM   ME

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.

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Document Object Identifier (DOI): 10.3386/w9660

Published: Jon Faust & John H. Rogers & Eric Swanson & Jonathan H. Wright, 2003. "Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1031-1057, 09. citation courtesy of

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