Is the response of the Bank of England to exchange rate movements frequency-dependent?

Gupta, Rangan; Caraiani, Petre

Is the response of the Bank of England to exchange rate movements frequency-dependent?

dc.contributor.author	Gupta, Rangan
dc.contributor.author	Caraiani, Petre
dc.date.accessioned	2020-09-30T07:23:05Z
dc.date.issued	2020-03
dc.description.abstract	In this paper, we estimate a Small Open Economy Dynamic Stochastic General Equilibrium (SOEDSGE) model of the United Kingdom (UK), with the main focus being to test the hypothesis whether the Bank of England (BoE) responds to (frequency-dependent) exchange rate movements or not. For our purpose, we use an extended quarterly data set spanning the period of 1986:Q2 to 2018:Q1, which in turn includes the zero lower bound situation, and also estimate the SOEDSGE model based on observable data decomposed into its frequency components. We find that the BoE not only responds to exchange rate movements in a statistically significant manner, but also that it primarily focuses on long-term movements of currency depreciations more strongly than shortterm fluctuations of the same. In general, our results are also confirmed for three other developed inflation-targeters namely, Australia, Canada and New Zealand.	en_ZA
dc.description.department	Economics	en_ZA
dc.description.embargo	2021-03-01
dc.description.librarian	am2020	en_ZA
dc.description.uri	http://www.elsevier.com/locate/jmacro	en_ZA
dc.identifier.citation	Caraiani, P. & Gupta, R. 2020, 'Is the response of the Bank of England to exchange rate movements frequency-dependent?', Journal of Macroeconomics, vol. 63, art. 103187, pp. 1-10.	en_ZA
dc.identifier.issn	0164-0704 (print)
dc.identifier.issn	1873-152X (online)
dc.identifier.other	10.1016/j.jmacro.2019.103187
dc.identifier.uri	http://hdl.handle.net/2263/76277
dc.language.iso	en	en_ZA
dc.publisher	Elsevier	en_ZA
dc.rights	© 2019 Elsevier Inc. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Journal of Macroeconomics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Journal of Macroeconomics, vol. 63, art. 103187, pp. 1-10, 2020. doi : 10.1016/j.jmacro.2019.103187.	en_ZA
dc.subject	Small open economy DSGE model	en_ZA
dc.subject	Monetary policy rule	en_ZA
dc.subject	Exchange rate	en_ZA
dc.subject	Structural estimation	en_ZA
dc.subject	Bayesian analysis	en_ZA
dc.subject	Wavelets	en_ZA
dc.subject	Small open economy dynamic stochastic general equilibrium (SOEDSGE)	en_ZA
dc.subject	United Kingdom (UK)	en_ZA
dc.subject	Bank of England (BoE)	en_ZA
dc.title	Is the response of the Bank of England to exchange rate movements frequency-dependent?	en_ZA
dc.type	Postprint Article	en_ZA