Impact of the Central Bank's Communication on FX Market Dynamics (In Press)

Yukhymenko, Tetiana; Sorochan, Oleh

doi:10.26531/vnbu2023.255.01

Tetiana Yukhymenko a

Oleh Sorochan a

a National Bank od Ukraine, Kyiv, Ukraine

Abstract

This study explores the impact of central bank communications on FX market dynamics. Our main results suggest that the NBU’s statements and press releases on monetary policy issues do indeed matter. For instance, we find that exchange rate movements and volatility are negatively correlated with the volumes of publications of the NBU on its official website. However, this effect is noticeably larger for volatility than for exchange rate changes. The impact of communication on FX developments is strongest a week after a news release, and it persists further. Furthermore, these indicators turn out to be more sensitive to monetary policy announcements than NBU updates overall.

DOI

https://doi.org/10.26531/vnbu2023.255.01

JEL Codes

C55, E58, E71

Keywords

monetary policy central bank communications FX market text analysis

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Cite as: Yukhymenko, T., Sorochan, O. (2023). Impact of the Central Bank's Communication on FX Market Dynamics (In Press). Visnyk of the National Bank of Ukraine, 255, . https://doi.org/10.26531/vnbu2023.255.01

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