What Can the ECB Learn from Bundesbank Interventions? � Evidence on the Link Between Exchange Rate Volatility and Interventions
AbstractUsing daily Bundesbank foreign exchange market intervention data, we employ a multinomial logit approach to estimate an intervention reaction function for the German Central Bank using options implied volatilities and the deviation of the exchange rate from its target level as explanatory variables. The empirical results underscore that distinguishing between positive and negative interventions improves the statistical properties of the Bundesbank reaction function. As the Bundesbank is often being seen as a paragon for the European Central Bank (ECB), we also discuss the implications of our results for the intervention policy of the ECB.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 955.
Length: 30 pages
Date of creation: Nov 1999
Date of revision:
Multinomial logit model; exchange rate volatility; central bank foreign exchange market interventions;
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- F31 - International Economics - - International Finance - - - Foreign Exchange
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- Peter Brandner & Harald Grech & Helmut Stix, 2001.
"The Effectiveness of Central Bank Intervention in the EMS: The Post 1993 Experience,"
Working Papers, Oesterreichische Nationalbank (Austrian Central Bank)
55, Oesterreichische Nationalbank (Austrian Central Bank).
- Brandner, Peter & Grech, Harald & Stix, Helmut, 2006. "The effectiveness of central bank intervention in the EMS: The post 1993 experience," Journal of International Money and Finance, Elsevier, Elsevier, vol. 25(4), pages 580-597, June.
- Peter Brandner & Harald Grech & Helmut Stix, 2001. "The Effectiveness of Central Bank Intervention in the EMS. The Post 1993 Experience," WIFO Working Papers, WIFO 168, WIFO.
- Christian Pierdzioch, 2000. "The Effectiveness of the FX Market Interventions of the Bundesbank During the Louvre Period: An Options-Based Analysis," Kiel Working Papers 971, Kiel Institute for the World Economy.
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