1. ECB Statements and the Euro-Dollar Exchange Rate David-Jan Jansen, De Nederlandsche Bank (Research Department) & Jakob de Haan, Groningen University & CES-Ifo München

2. Outline of presentation IResearch questions IIMethodology IIIECB communication IVEffects on the Euro rate VConclusions

3. RESEARCH QUESTIONS Members of ECB Governing Council have made many statements: How have currency markets reacted? 1. Description of (part of) ECB communication 2. Study reaction of level and volatility of the Euro rate

4. METHODOLOGY: Interviews, speeches etc. Data source: Bloomberg 1 January 1999-17 May 2002 Daily data

5. METHODOLOGY (Cont.) News approach: if markets are efficient, prices will only change in response to unexpected news Statements modelled with dummies E-GARCH specification we allow statement dummies to have effect on level and volatility

6. METHODOLOGY (End) (1) Monetary policy ECB interest rates M3 GDP growth in the Euro area Inflation in the Euro area Pass-through (2) The Euro Expectations on the value of the Euro No target versus inflation Intervention

7. ECB COMMUNICATION (PERSONS)

8. ECB COMMUNICATION ( CONTENT 1 )

9. ECB COMMUNICATION ( CONTENT 2 )

10. RESULTS (1) GENERAL RESULT: FEW AND SMALL EFFECTS ON LEVEL MORE AND LARGE EFFECTS ON VOLATILITY

11. RESULTS (2)

12. Results (3): taking content of statements into account

13. CONCLUSIONS More impact on volatility than level Furthermore, Negative relationship interest rates/inflation and Euro Talking up the Euro not successful Bundesbank dominant in news coverage