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Monetary policy responses to COVID-19 in emerging European economies: measuring the QE announcement effects on foreign exchange markets

Akdogan, Idil Uz; (2023) Monetary policy responses to COVID-19 in emerging European economies: measuring the QE announcement effects on foreign exchange markets. Empirica 10.1007/s10663-023-09578-9. (In press). Green open access

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Abstract

This paper examines the effects of quantitative easing (QE) announcements by emerging market central banks in Europe during the COVID-19 pandemic, particularly on exchange rates with a higher frequency setting. Two different methodologies are used for analysing the policy announcement effects. The first methodology is the event study method that measures the sample exchange rates’ mean and cumulative mean abnormal return around the time of event. The second one is the time series approach that measures asymmetric behaviour of the exchange rate volatility to monetary policy shocks by employing exponential GARCH model. The results show that the foreign exchange markets respond to QE announcements in all selected countries. The response of exchange rates varies across countries and event windows. QE announcements cause appreciation of domestic currency in Hungary and Poland, and depreciation in Turkey. Additionally, the QE announcements increase exchange rate volatility in Hungary and Poland while they reduce volatility in Turkey. The asymmetric behaviour of domestic currencies prevails in all selected countries, but this asymmetry is sensitive to the exchange rate and the length of the window.

Type: Article
Title: Monetary policy responses to COVID-19 in emerging European economies: measuring the QE announcement effects on foreign exchange markets
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s10663-023-09578-9
Publisher version: https://doi.org/10.1007/s10663-023-09578-9
Language: English
Additional information: Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
Keywords: Social Sciences, Economics, Business & Economics, Large-scale asset purchases, Exchange rates, Emerging markets, Event study, Volatility, EVENT, BEHAVIOR, RETURNS, TESTS
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/10171385
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