Browsing by Subject "European Central Bank"

Now showing 1 - 2 of 2

Open Access
ECB policy response to the Euro
(2011) Demir, İshak
The exchange rate is an important part of transmission mechanism in the determination of monetary policy because movements in the exchange rate has signiÖcant e§ect on the macroeconomy. Measuring the reaction of monetary policy to the movements in exchange rate has some di¢ culties due to the simultaneous response of monetary policy on the exchange rate and the possibility that both variables respond several other variables. This study will use an identiÖcation method based on the heteroscedasticity in the high-frequency data. In particular, shifts in the importance of exchange rate relative to monetary policy shocks, and the estimated changes in the covariance between the shocks that result, allow us to measure the reaction of interest rates to changes in exchange rates. This study comes up with unbiased estimates with heteroscedasticity based identiÖcation approach and results of this paper suggest that ECB systematically respond to the exchange rate movements but that quantitative e§ects are small. The empirical results indicate that a 1 point rise (fall) in the exchange rate tends to decrease (increase) the three-month interest rate by around 20 basis points. Small and negative reaction coe¢ cient implies that ECB may respond to the movements in exchange rate only to the extent warranted by their impact on the macroeconomy, since it a§ects the expected ináation and future output path.
Open Access
Effect of central bank governor speeches on financial markets
(2024-09) Turan, Fatma Senem
This thesis examines the impact of speeches by central bank governors from European Central Bank (ECB), Deutsche Bundesbank, Bank of France, Bank of Spain and Bank of Italy on OIS yields, bond yields, stock prices and exchange rate. Using two standard event study designs via Rigobon and Sack (2004) and Gürkaynak et al. (2005), the study finds that financial markets are sensitive to central bank governor speeches. OIS and sovereign bond yields with maturities from 5 to 30 years respond significantly to central bank speeches. For stock prices, the analysis includes the Euro Stoxx50, Euro SX7E, German DAX30, French CAC40, Spanish IBEX35, and Italian MIB30. Even if there are some positive responses, the results align with the typical understanding that a negative relationship exists between stock prices and monetary policy shocks. Lastly, the exchange rate is the least responsive asset among the others, with significant reactions observed in speeches by the ECB governor and the Bundesbank governor on the euro- USD dollar exchange Overall, national central bank governors affect financial markets. Among various assets, their voices are particularly influential. However, while the speeches of periphery countries’ central bank governors have an impact, ECB governor speeches usually dominate those of the periphery countries’ central bank governor speeches. In contrast, the central bank governor speeches of core countries, Germany and France, often have more influence than ECB governor speeches.