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Un Modelo de Intervención Cambiaria

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  • Christian A. Johnson

Abstract

This article presents an intervention methodology to neutralize fluctuations not associated to fundamentals. The mechanism is based on a conditional heteroskedasticity model GARCH(1,1) for the nominal exchange rate, combined with the Value at Risk concept. The simulation provides the authority with a tool to evaluate whether or not current exchange rate fluctuations can be connected to fundamentals, or if an intervention is required using international reserves to reduce exchange rate pressures. Because of the lower implicit volatilities, the intervention system will help develop the domestic hedging market, and also increase investment and international trade.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 90.

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Date of creation: Dec 2000
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Handle: RePEc:chb:bcchwp:90

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References

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  1. Leonardo Bartolini & Lorenzo Giorgianni, 2000. "Excess volatility of exchange rates with unobservable fundamentals," Staff Reports 103, Federal Reserve Bank of New York.
  2. Dominguez, Kathryn & Frankel, Jeffrey A., 1990. "Does Foreign Exchange Intervention Matter? Disentangling the Portfolio an Expectations Effects for the Mark," Department of Economics, Working Paper Series qt84c522k9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Garber, Peter M, 1990. "Famous First Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 35-54, Spring.
  4. Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 161-190, February.
  5. Anna J. Schwartz, 2000. "The Rise and Fall of Foreign Exchange Market Intervention," NBER Working Papers 7751, National Bureau of Economic Research, Inc.
  6. Vitale, Paolo, 1999. "Sterilised central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, vol. 49(2), pages 245-267, December.
  7. Bonser-Neal, Catherine & Tanner, Glenn, 1996. "Central bank intervention and the volatility of foreign exchange rates: evidence from the options market," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 853-878, December.
  8. Francisco A. Gallego & Leonardo Hernandez & Klaus Schmidt-Hebbel, 2000. "Capital Controls in Chile: Effective? Efficient?," Econometric Society World Congress 2000 Contributed Papers 0330, Econometric Society.
  9. Hong G. Min, 1998. "Determinants of emerging market bond spread : do economic fundamentals matter?," Policy Research Working Paper Series 1899, The World Bank.
  10. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
  11. Christian Andrew Johnson, 2000. "Métodos de Evaluación del Riesgo para Portafolios de Inversión," Working Papers Central Bank of Chile 67, Central Bank of Chile.
  12. Naranjo, Andy & Nimalendran, M, 2000. "Government Intervention and Adverse Selection Costs in Foreign Exchange Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 453-77.
  13. Ricardo J. Caballero, 2000. "Structural Volatility in Chile: A Policy Report," Research Department Publications 4211, Inter-American Development Bank, Research Department.
  14. Dominguez, Kathryn Mary, 1990. "Market responses to coordinated central bank intervention," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 121-163, January.
  15. Christian A. Johnson, 2000. "Value at Risk Ajustado por Liquidez: Una Aplicación a los Bonos Soberanos Chilenos," Working Papers Central Bank of Chile 76, Central Bank of Chile.
  16. Vitale, Paolo, 2001. "Foreign Exchange Intervention, Policy Objectives and Macroeconomic Stability," CEPR Discussion Papers 2886, C.E.P.R. Discussion Papers.
  17. Catherine Bonser-Neal, 1996. "Does central bank intervention stabilize foreign exchange rates?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 43-57.
  18. Kathryn M. Dominguez, 1993. "Does Central Bank Intervention Increase the Volatility of Foreign Exchange Rates?," NBER Working Papers 4532, National Bureau of Economic Research, Inc.
  19. Humpage, Owen F, 1999. "U.S. Intervention: Assessing the Probability of Success," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 731-47, November.
  20. Owen F. Humpage & William P. Osterberg, 2000. "Why intervention rarely works," Economic Commentary, Federal Reserve Bank of Cleveland, issue Feb 1.
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Cited by:
  1. Christian A. Johnson, 2002. "Value at Risk: Teoría y Aplicaciones," Working Papers Central Bank of Chile 136, Central Bank of Chile.

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