Spill-over dynamics of central bank interventions
AbstractCentral banks frequently intervene in foreign exchange markets to reduce volatility or to correct misalignments. Such operations may be successful if they drive away destabilizing speculators. However, the speculators do not simply vanish but may reappear on other foreign exchange markets. Using a model in which traders are able to switch between foreign exchange markets, we demonstrate that while a central bank indeed has several means at hand to stabilize a specific market, the variability of the other markets depends on how the interventions are implemented.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Modeling, Computing, and Mastering Complexity 2003 with number 21.
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foreign exchange markets; central bank intervention; technical and fundamental analysis;
Other versions of this item:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-FIN-2003-09-14 (Finance)
- NEP-IFN-2003-09-14 (International Finance)
- NEP-MAC-2003-09-14 (Macroeconomics)
- NEP-MON-2003-09-14 (Monetary Economics)
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