In this sense, the implications are very similar to those described by Xavier Gabaix and Matteo Maggiori in their 2015 Quarterly Journal of Economics article, which states that the risk-bearing capacity of financial intermediaries provides a role for capital flows to affect the exchange rate.16 The difference is only that if asset purchases are understood by investors to be part of the reaction function of central banks, then the exchange rate can be expected to adjust before capital flows take place. This is certainly what we have seen in the euro area. This also means that we should treat more carefully findings in the event-study literature that assign most of the observed exchange rate change around central bank asset purchase announcements to the signalling channel.17 Given that intermediaries are forward-looking but constrained by their balance sheets, policy-induced exchange rate changes can also be expected to reflect expectations of future cross-border capital flows and their associated impact on the future supply of and demand for currency. In this sense, the debate also shares some similarities with a related strand of the literature, namely the transmission channels of sterilised foreign exchange interventions. The view that such interventions are effective mainly by signalling future policy intentions is frequently challenged by empirical evidence suggesting that portfolio rebalancing may have economically relevant effects.18 Of course, this does not mean that understanding the potential spillovers of central bank asset purchase programmes is enough to explain exchange rate movements.
To the extent that such policies can be anticipated by market participants, financial intermediaries could be expected to price in the resulting shift in the relative supply of and demand for currency before capital flows take place. As a consequence, international portfolio rebalancing considerations may, at times, drive a wedge between expected future short-term rates and the exchange rate. My remarks today are by no means conclusive and they are based on tentative evidence. But I hope that they provide impetus to further, more systematic research on a topic that is not only intriguing from an intellectual perspective, but also of significant relevance to policymakers in their efforts to improve the understanding of the transmission channels of non-standard monetary policy measures. Thank you for your attention. 1 See e.g. Fratzscher, M., M. Lo Duca and R. Straub (2016), “ECB Unconventional Monetary Policy: Market Impact  and International Spillovers”, IMF Economic Review, 64(1), pp. 36-74; Georgiadis, G. and J. Gräb (2016), “Global Financial Market Impact of the Announcement of the ECB’s Asset Purchase Programme”, Journal of Financial Stability, 26, pp. 257-265; Rajan, R. (2014), “Competitive monetary easing: is it yesterday once more?”, remarks at the Brookings Institution, Washington, D.C., April 10; and Bernanke, B.S. (2015), “Federal Reserve Policy in an International Context”, paper presented at the 16th Jacques Polak Annual Research Conference hosted by the International Monetary Fund, Washington, D.C., 5 and 6 November. 2 See Cœuré, B.