Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322365 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
Staff Memo No. 3/2025
Publisher: 
Norges Bank, Oslo
Abstract: 
I estimate how monetary policy affects the exchange rate in Norway using a local projection instrumental variables (LP-IV) framework with high-frequency monetary policy surprises as instruments. I find that a surprise increase in the Norwegian policy interest rate leads to an immediate appreciation of the currency followed by a gradual depreciation. The effects are short-lived, with the exchange rate returning to its pre-shock level within three months. Surprise changes in monetary policy in the Euro zone has a similar, but opposite effect on the Euro/NOK exchange rate. Increases in the projected interest rate path published by Norges Bank also appreciates the currency, and the effects are stronger for changes at longer projection horizons.
Subjects: 
Monetary Policy Transmission
Exchange Rate
Interest Rates
High Frequency
JEL: 
C26
E43
E44
E52
E58
F31
F42
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-356-7
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Research Report
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