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Monetary policy

Essays on Macro-Finance and Monetary Policy

The thesis explores theoretical and empirical aspects of monetary policy and financial issues. Chapter 1 investigates the real-time effects of foreign exchange intervention on the Danish kroner - Euro exchange rate using official intraday intervention data. We find that intervention exerts a statistically and economically significant influence on exchange rate returns only when the direction of intervention is consistent with monetary policy stance. Chapter 2 investigates the intraday effects of sterilized foreign exchange intervention on exchange rate spreads using official intraday intervention data. The main result is that intervention purchases and intervention sales both exert a significant influence on exchange rate spreads but in opposite directions: Intervention sales of EUR, on average, reduce the spread while intervention purchases of EUR, on average, increase the spread. Chapter 3 includes in consistent way a role for a monetary policy transmission mechanism through long interest rates in a DSGE model. A financial constraint makes the representative consumer to issue bonds of long maturities equal to the value of new housing stock. Finally, chapter 4 tries to resurrect the troubles DSGE models have in modelling empirical plausible bond risk premia. The model in the paper is able to generate empirical plausible moments for term premia, and provides a micro foundation for models which are known to generate plausible risk premia namely the affine term structure models originated in finance.