Jens Klose
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Does the ECB rely on a Taylor rule? Comparing ex-post with real time data
Ansgar Belke , Jens Klose -
Exchange rate movements in the presence of the zero lower bound
Jens Klose doi: http://dx.doi.org/10.21511/bbs.12(1).2017.10Banks and Bank Systems Volume 12, 2017 Issue #1 pp. 82-87
Views: 2317 Downloads: 497 TO CITE АНОТАЦІЯExchange rates are expected to adjust according to the stance of monetary policies, which are in normal times differences in interest rates set by the central banks. This interest rate parity does, however, no longer hold if central banks approach the zero lower bound on interest rates and switch to measures of quantitative easing. Therefore, the author estimates exchange rate changes based on the different stance of the monetary base, which is an indicator of differing monetary policies in the countries. The results reveal that indeed exchange rates movements in the Dollar-Euro-Rate can be explained by differences in the monetary base, since the zero lower bound has become binding. However, the influence depends crucially on whether the monetary base is increased or decreased and whether the other central bank is also expanding or reducing its balance sheet at the same time.
Keywords: monetary base, exchange rate, Fed, ECB.
JEL Classification: E52, E58, F42
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