Unconventional monetary policy and the dollar: conventional signs, unconventional magnitudes

Abstract

We examine the effects of unconventional monetary policy surprises on the value of the dollar using high-frequency intraday data and contrast them with the effects of conventional policy tools. Identifying monetary policy surprises from changes in interest rate future prices in narrow windows around policy announcements, we find that monetary policy surprises since the Federal Reserve lowered its policy rate to the effective lower bound have had larger effects on the value of the dollar. In particular, we document that the impact on the dollar has been roughly three to four times that following conventional policy changes prior to the 2007-08 financial crisis. JEL Codes: E5, E43, F31.