Abstract
We examine the impact of US monetary policy uncertainty (MPU) on the dollar exchange rates of ten Asian economies between February 2006 and January 2019. Our results, which are based on an EGARCH model, indicate that MPU tends to increase the variance of exchange rates rather than affecting the level of exchange rates. The results may have significant implications for the ten economies’ conduct of monetary policy.
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Notes
The complete set of terms that are included in the algorithm are: federal reserve, the fed, money supply, open market operations, quantitative easing, monetary policy, fed funds rate, overnight lending rate, Bernanke, Volcker, Greenspan, central bank, interest rates, fed chairman, fed chair, lender of last resort, discount window, European Central Bank, ECB, Bank of England, Bank of Japan, BOJ, Bank of China, Bundesbank, Bank of France, Bank of Italy along with terms related to uncertainty. The detailed appendix is available on the following web-page: https://www.policyuncertainty.com/monetary.html
Our results remain unchanged when we estimate the model using a GARCH (1,1) specification.
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The authors gratefully acknowledge the many helpful comments and suggestions of Abdul Abiad and Yasuyuki Sawada.
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Park, D., Qureshi, I., Tian, S. et al. Impact of US monetary policy uncertainty on Asian exchange rates. Econ Change Restruct 55, 73–82 (2022). https://doi.org/10.1007/s10644-020-09307-3
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DOI: https://doi.org/10.1007/s10644-020-09307-3