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

TABLE 7 GBP/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 4 April 2001______________________________________________________________

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___________________

DLNGBP(0)

0.0200**

(0.0076)__________________

0.25

4.1793**

DLNGBP(1)

-0.0042

(0.0074)__________________

0.07

0.4017

DLNGBP(2)

-0.0119

(0.0084)__________________

0.12

0.7524

DLNGBP(3)

0.0065

(0.0083)__________________

0.20

1.3005

DLNGBP(4)

-0.0006

(0.0080)__________________

0.09

0.6323

DLNGBP(5)

-0.0151

(0.0096)__________________

0.18

1.2038

DLNGBP(6)

-0.0096

(0.0089)__________________

0.17

1.7954

DLNGBP(7)

0.0002

(0.0098)__________________

0.19

1.1565

DLNGBP(8)

-0.0086

(0.0128)__________________

0.16

0.7382

DLNGBP(9)

-0.0028

(0.0098)__________________

0.13

0.6897

DLNGBP(10)

-0.0115

(0.0105)

0.07

0.4292

DLNGBP(11)

0.0130
(0.0133)

0.28

2.5368**

DLNGBP(12)

0.0096
(0.0083)

0.11

0.5472

DLNGBP(13)

-0.0076

(0.0899)

0.27

1.4709

DLNGBP(14)

-0.0088

(0.0084)__________________

0.39

2.5909**

DLNGBP(15)

0.0096

(0.0094)__________________

0.13

1.0894

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 GBP/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).________________