The effect of volatility transmission around QE announcements on the Norwegian exchange rate and economy

Abstract

This paper investigates in how far Quantitative Easing announcements made by the Federal Reserve, the Bank of England, and the European Central Bank influence the Norwegian FX market. We measure the impact of these announcements on the corresponding exchange rates as well as the transmission to other exchange rates by examining the intraday exchange rate volatility. Moreover, we examine the effect of FX volatility on Norway’s economy using a VAR model. This unique combination of approaches will add to the existing literature on causes of exchange rate volatility and on the effects of monetary policy announcements on the FX market and economy, to form a more fulfilled picture of the effect of monetary policy announcements on FX volatility and their impact on global economics