Do Foreign Exchange Market Responses to Interest Rate Announcements Evolve over Time? Evidence from Poland
Journal Title: Studia Prawno-Ekonomiczne - Year 2018, Vol 106, Issue
Abstract
Evidence from the international markets shows that the responsiveness of financial instruments’ prices to monetary policy announcements tends to weaken in a low level interest rate environment. The objective of our study is to verify if a similar effect existed in Poland when interest rate decreased from high to low levels over time. The focus of our paper is the currency market. We use GARCH class models with dummy variables as our main methodological tool. In the case of interest rate announcements, we distinguish between the nominal changes in interest rate and surprise changes. The surprise component is extracted by comparing the actual NBP announcements regarding the change of the interest rate with market expectations captured by the consensus forecasts from Reuters surveys of financial market participants in Poland. The results from our study demonstrate that in a lower interest rate environment, the foreign exchange market in Poland has become less responsive to interest rate decisions. We also find evidence that the reactions of foreign exchange rate returns tend to be stronger in case of interest rate changing upwards rather than downwards. Our results about the evolving nature of reactions of the foreign exchange market in Poland in both high and low interest rate environments may provide helpful information for policymakers about the impact of their policy decisions.
Authors and Affiliations
Janusz Brzeszczyński, Jerzy Gajdka, Ali M. Kutan
Keywords
Related Articles
- EP ID EP616821
- DOI -
- Views 78
- Downloads 0
Zmiany struktury pracujących w Polsce w kontekście budowy gospodarki innowacyjnej / Changes in the Structure of Employment in Poland in the Context of Building an Innovative Economy
The aim of the article is an evaluation of trend of changes in the structure of employment in Poland in terms of their compliance with structural changes characteristic of the process of building an innovative economy. T...
Redukcja kosztów kredytu konsumenckiego a przedterminowa jego spłata w świetle art. 49 Ustawy o kredycie konsumenckim
The aim of this study was to examine the effects of early repayment of consumer credit in the form of a proportional decrease (reduction) of the total cost of the loan according to the period of which the contract has be...
The strategies of net working capital management and their impact on the profitability of Polish it and electromechanical stock companies
The aim of this study is to explore the character and strength of the correlation between the established strategy of net working capital management and the profitability of particular stock companies belonging to differ...
Nowy „paradygmat” ochrony konsumenta na rynku finansowym w świetle zmian regulacyjnych i instytucjonalnych po kryzysie finansowym 2007–2009
W tekście autorka zabiera głos w dyskusji na temat wprowadzenia nowego paradygmatu ochrony konsumenta na rynku usług finansowych. Podejmuje próbę oceny reform wprowadzanych po kryzysie w latach 2007– 2009 w Europie i w S...
Status prawny muzeów uczelnianych – problemy prawne i wyzwania praktyczne
College (university) museums are organizational form of cultural activities. That kind of institutions – due to situating as part of the higher education institution – apart from basic aims of museums, such as accumulati...