Unconventional monetary policy and the dollar–euro exchange rate: further evidence from event studies

ABSTRACT

New evidence is presented on the impact on the US dollar–euro (USD–EUR) exchange rate of the unconventional monetary policy conducted by the US Federal Reserve (FED) and the European Central Bank (ECB). To that end, we employ an event study approach using daily the USD–EUR exchange rate for the period from 2 January 2007 to 31 January 2015. Our results indicate that the announcement and subsequent implementation of such measures by the ECB would have caused in general an appreciation of the dollar, while those by the FED would have caused a depreciation of the dollar.

KEYWORDS:

• Quantitative easing
• unconventional monetary policy
• announcements
• Federal Reserve
• European Central Bank
• exchange rates

JEL CLASSIFICATION:

• C10
• E58
• F31
• G15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Note that an increase in the exchange rate implies a depreciation of the national currency (the US dollar) and an appreciation of foreign currency (the Euro).

Additional information

Funding

This work is supported by the Government of Spain [grant number ECO2011-23189].