[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/aea/aejmac/v8y2016i2p137-81.html
   My bibliography  Save this article

The Exchange Rate Response to Monetary Policy Innovations

Author

Listed:
  • Viktoria Hnatkovska
  • Amartya Lahiri
  • Carlos A. Vegh
Abstract
We present a new data fact: in response to a monetary tightening, the domestic currency tends to appreciate in developed countries but depreciate in developing countries. A model is developed to rationalize this contrasting pattern. It has three key channels of monetary transmission: a liquidity demand channel, a fiscal channel, and an output channel. The paper shows that a calibrated version of the model can explain the contrast between developed and developing countries. Using counterfactual experiments and empirical evidence, we identify differences in the liquidity demand effect as critical in explaining the contrasting responses generated by the model. (JEL E23, E43, E52, F31, F33, O19)

Suggested Citation

  • Viktoria Hnatkovska & Amartya Lahiri & Carlos A. Vegh, 2016. "The Exchange Rate Response to Monetary Policy Innovations," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(2), pages 137-181, April.
    • Handle: RePEc:aea:aejmac:v:8:y:2016:i:2:p:137-81
    Note: DOI: 10.1257/mac.20140362
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.20140362
    Download Restriction: no
    File URL: https://www.aeaweb.org/aej/mac/data/0802/2014-0362_data.zip
    Download Restriction: no
    File URL: https://www.aeaweb.org/aej/mac/app/0802/2014-0362_app.pdf
    Download Restriction: no
    File URL: https://www.aeaweb.org/aej/mac/ds/0802/2014-0362_ds.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:8:y:2016:i:2:p:137-81. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.