Bank of England interest rate announcements and the foreign exchange market
Melvin, Michael, Saborowski, Christian, Sager, Michael and Taylor, Mark P., 1958-. (2010) Bank of England interest rate announcements and the foreign exchange market. International Journal of Central Banking, Vol.6 (No.3). pp. 211-247. ISSN 1815-4654Full text not available from this repository.
Official URL: http://www.ijcb.org/journal/ijcb10q3a7.pdf
Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in exchange rate movements on MPC policy announcement days. We find evidence for non-linear regime switching between a high-volatility, informed trading state and a low-volatility, liquidity trading state. MPC surprise announcements are shown to significantly affect the probability that the market enters and remains within the informed trading regime, with some limited evidence of market positioning just prior to the announcement.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Economics
Faculty of Social Sciences > Warwick Business School
|Journal or Publication Title:||International Journal of Central Banking|
|Publisher:||Federal Reserve Board|
|Official Date:||September 2010|
|Number of Pages:||37|
|Page Range:||pp. 211-247|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
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