The Influence Of Unconventional Monetary Policy On The Euro Exchange Rate Fluctuation

As one of the most developed economies in the world,the euro area's volatility characteristics against the US dollar(hereinafter referred to as the euro exchange rate)have been receiving attention and research.After the outbreak of the US financial crisis in 2008,the euro exchange rate fluctuates dramatically.In order to stabilize the euro exchange rate and increase market liquidity,from the end of 2008 to the end of 2016,the European Central Bank conducted a total of 15 unconventional monetary policy announcements and adjustments,including long-term refinancing plans and asset-backed bond purchase plans.The unconventional monetary policy refers to the extension and innovation of existing monetary policy under the circumstance that the conventional monetary policy cannot effectively play its role in the operation and guidance of financial markets.These policy events mitigate the spread of the crisis in the euro area and Deterioration,at the same time,ha a certain impact on the volatility characteristics of the euro exchange rate.Studying the fluctuation characteristics of the euro exchange rate in the context of such policy events will help us understand the impact of the implementation of unconventional monetary policies on the euro market,and at the same time it has a certain significance for the improvement of China's foreign exchange market.Based on the characteristics of the research at home and abroad,we choose the unconventional monetary policy implemented by the ECB as the influencing factor of the exchange rate and analyze the volatility of the exchange rate by using a specific model.The purpose is to study the impact of the unconventional monetary policy on the exchange rate of the euro and find that whether the volatility of the rate of return is affected.The event study method is a statistical method to analyze whether an event has an impact on the asset price.The traditional event research method includes defining an event window,calculating abnormal returns and accumulative abnormal returns,and making a significant test on returns.Based on the first step of the incident research method,this paper compares and analyzes the leverage effect and long memory of the euro exchange rate before and after the publication of unconventional monetary policy.By combining the TARCH model with the traditional R/S test.This paper mainly studies the following aspects:(1)Based on the unconventional monetary policy events implemented by the European Central Bank since the financial crisis in 2008,we studied the effect of the leverage and long-term memory effects on euro exchange rate,and compared whether the leverage effect and long memory were significantly changed before and after the incident;(2)Based on the leverage effect and long memory characteristics of the exchange rate of the euro,this paper studies whether the unconventional monetary policy events announced by the central bank of the euro have a significant impact on the exchange rate of the euro.The econometric analysis based on event research method shows that:(1)The ECB announcement of unconventional monetary policy events has a negative impact on the leverage effect of the euro's exchange rate of return,which will weaken the leverage effect of the rate of return and reduce the degree of volatility's reaction to negative shocks.The incident will,to a certain extent,also make The leverage effect of the rate of return is not significant;(2)The ECB announcement of unconventional monetary policy events has a positive impact on the long memory of the exchange rate of the euro,which will increase the long memory Hurst index reflecting the rate of return and enhance the memory;(3)It can be seen from the analysis results that under the background of unconventional monetary policies,the market has a certain degree of “optimism” on the exchange rate of the euro,but in the long run,it will cause the asset price to fluctuate significantly in the future,increasing the market's instability;(4)Due to the economic downturn and the impact of international issues such as Brexit and Refugee Crisis,the leverage effect of the Euro exchange rate in 2016 was unusually volatile compared to 2008 to 2015.