Monetary Policy News and Exchange Rate Responses: Do Only Surprises Matter?

TABLE 3 DEM/USD: Summary of Same-Day and Delayed Exchange Rate Responses to the
______________________Unexpected Change in The Federal Funds Target Rate______________________

Daily Data: 27 March 1989 to 31 December 1998________________________________________________________

Each row below is associated with a separate regression model. Only the point estimate and the associated
standard error for the independent variable FFT-UNEXPECTED are shown, regardless of whether or not the
control variables are significant.______________________________________________________________________________________

FFT-UNEXPECTED

R-squared_______________

F-statistic___________________

DLNDEM(0)

0.0267***

(0.0087)__________________

0.26

3.8885**

DLNDEM(1)

-0.0040

(0.0094)__________________

0.16

0.9382

DLNDEM(2)

-0.0190

(0.0112)__________________

0.12

0.6902

DLNDEM(3)

-0.0024

(0.0095)__________________

0.22

1.3385

DLNDEM(4)

-0.0052

(0.0080)__________________

0.14

0.9297

DLNDEM(5)

-0.0090

(0.0106)__________________

0.12

0.6581

DLNDEM(6)

-0.0179

(0.0108)__________________

0.30

2.1190*

DLNDEM(7)

-0.0023

(0.0093)__________________

0.12

0.6273

DLNDEM(8)

-0.0019

(0.0135)__________________

0.19

0.8494

DLNDEM(9)

-0.0071

(0.0151)__________________

0.20

1.0569

DLNDEM(10)

-0.0147

(0.0095)

0.14

1.4092

DLNDEM(11)

0.0207
(0.0157)

0.27

2.6181**

DLNDEM(12)

-0.0073

(0.0110)

0.10

0.5304

DLNDEM(13)

-0.0124

(0.0104)

0.34

1.8802

DLNDEM(14)

-0.0064

(0.0085)__________________

0.38

2.6277**

DLNDEM(15)

0.0056

(0.0116)__________________

0.09

0.6330

NOTES:

(a) * Denotes significance at 90%, ** Denotes significance at 95%, *** Denotes significance at 99%.

(b) Standard Errors in ( ) below the point estimates.

(c) Estimations are defined in Equation (3) in the text.

(d) The dependent variable is lead one through fifteen of the first difference of the log of the daily DEM/USD spot exchange rate.

(e) The independent variable FFT-UNEXPECTED measures the unexpected element of the Federal Funds Target rate change on FOMC
dates. This variable is taken from Kuttner (2001).

(f) The control variables measure the surprise element of US macroeconomic announcements concerning CPI (CPI-UNEXP), Industrial
Production (IP-UNEXP), PPI (PPI-UNEXP), Balance of Trade (TRADE-UNEXP) and Unemployment (UNEM-UNEXP).________________