Does the Information Content of Central Bank Speeches Impact on the Level of Exchange Rate? A Comparative Study of Canadian and Australian Central Bank Communications

Becksndale Masawi, Sukanto Bhattacharya, Terry Boulter

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Traditionally, central banks have used direct intervention in currency markets when the exchange rate has moved away from equilibrium or when the volatility has been excessive and the literature on the effects of indirect intervention is sparse. We examine whether indirect intervention has any impact on the exchange rate levels by examining the central bank verbal communications in Australia and Canada. We find evidence that the Bank of Canada's (BOC's) speeches reduce the mean exchange rate returns but not the Reserve Bank of Australia's (RBA's) speeches. Our results show that the socio-economic similarities between countries do not guarantee a similar impact of indirect intervention.

Original languageEnglish
Article number1850005
JournalReview of Pacific Basin Financial Markets and Policies
Volume21
Issue number1
DOIs
Publication statusPublished - 1 Mar 2018

Keywords

  • Central bank speeches
  • event study
  • high frequency data
  • indirect intervention
  • non-parametric tests

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