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3545. Prediction of exchange rate changes with monetary policy indexation of FOMC meeting minutes
Invited abstract in session WB-28: Advancements of OR-analytics in statistics, machine learning and data science 9, stream Advancements of OR-analytics in statistics, machine learning and data science.
Wednesday, 10:30-12:00Room: 065 (building: 208)
Authors (first author is the speaker)
| 1. | Jia-Hau Guo
|
| Department of Information Management and Finance, National Yang Ming Chiao Tung University | |
| 2. | Guan-Yu Lai
|
| Information Management and Finance, National Yang Ming Chiao Tung University |
Abstract
We derive four monetary policy indices from FOMC (Federal Open Market Committee) minutes to analyze exchange rate changes in several foreign currencies. These monetary policy indices are found to have significant impacts on foreign currency changes in emerging markets while exchange rate changes in some developed or industrial countries could depend on monetary policy indices from meeting records of their own central banks or central banks of their competitors. Additionally, a monetary policy uncertainty indicator based on entropy is introduced to further improve the prediction of exchange rate changes in certain currencies. We find that the uncertainty of meeting minutes could reduce the market belief in monetary policy stance, and then reduce the impact of monetary policy sentiments on exchange rate variations.
Keywords
- Analytics and Data Science
- Finance and Banking
- Forecasting
Status: accepted
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