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Capturing the time dynamics of central bank intervention

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  • Douglas, Christopher C.
  • Kolar, Marek
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    Abstract

    We estimate central bank reaction functions using the autoregressive conditional hazard model and the autoregressive conditional binomial model. We find that the Federal Reserve and Bundesbank intervened when the market was calmer, and the Bundesbank intervened in response to exchange rates being out-of-line with fundamentals. Japan intervened in response to changes in the nominal exchange rate, and intervention differed before and after Eisuke Sakakibara became Director General of the International Finance Bureau of the Ministry of Finance in Japan. We argue that these results are consistent with central bank policy goals and the effect of intervention on the exchange rate.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 19 (2009)
    Issue (Month): 5 (December)
    Pages: 950-968

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    Handle: RePEc:eee:intfin:v:19:y:2009:i:5:p:950-968

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    Web page: http://www.elsevier.com/locate/intfin

    Related research

    Keywords: Central Bank Intervention Time Series Econometrics;

    References

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    1. Michel Beine & Jérôme Lahaye & Christopher Neely & Franz Palm & Sébastien Laurent, 2007. "Central Bank intervention and exchange rate volatility: its continuous and jump components," ULB Institutional Repository 2013/10413, ULB -- Universite Libre de Bruxelles.
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    Cited by:
    1. Mohamed El Hedi Arouri & Duc Khuong Nguyen & Fredj Jawadi, 2010. "What can we tell about monetary policy synchronization and interdependence over the 2007-2009 global financial crisis?," Working Papers hal-00507826, HAL.

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