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Foreign Exchange Interventions in Croatia and Turkey: Should We Give a Damn?

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  • Balázs Égert

    ()

  • Maroje Lang

    ()

Abstract

This paper studies the impact of daily official foreign exchange interventions on the exchange rates of two EU candidate countries, namely Croatia and Turkey for the periods from 1996 to 2004 and from 2001 to 2004, respectively. Using the event study methodology and a variety of GARCH models reveals that both the Croatian and the Turkish central banks were in a position to influence, to some extent, the level of the exchange rate during the period studied. This lends support to the view that foreign exchange intervention may be effective to a limited extent in emerging market economies.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp755.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp755.

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Date of creation: 01 Mar 2005
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Handle: RePEc:wdi:papers:2005-755

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Keywords: central bank intervention; foreign exchange intervention; official interventions; foreign exchange market; effectiveness; exchange rate volatility; emerging economies; transition economies;

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References

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  1. Fatum, Rasmus & Hutchison, Michael M., 2003. "Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan," Santa Cruz Department of Economics, Working Paper Series qt3rg5p5j2, Department of Economics, UC Santa Cruz.
  2. Jorge Iván Canales Kriljenko & Cem Karacadag & Roberto Pereira Guimarães, 2003. "Official Intervention in the Foreign Exchange Market," IMF Working Papers 03/152, International Monetary Fund.
  3. Morana, Claudio & Beltratti, Andrea, 2000. "Central bank interventions and exchange rates: an analysis with high frequency data," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 10(3-4), pages 349-362, December.
  4. Rogers, J. M. & Siklos, P. L., 2003. "Foreign exchange market intervention in two small open economies: the Canadian and Australian experience," Journal of International Money and Finance, Elsevier, Elsevier, vol. 22(3), pages 393-416, June.
  5. Brainerd, Elizabeth & Cutler, David, 2005. "Autopsy on an Empire: Understanding Mortality in Russia and the Former Soviet Union," Scholarly Articles 2640589, Harvard University Department of Economics.
  6. Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(1), pages 161-190, February.
  7. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  8. Jonathan Kearns & Roberto Rigobon, 2002. "Identifying the Efficacy of Central Bank Interventions: The Australian Case," NBER Working Papers 9062, National Bureau of Economic Research, Inc.
  9. Ilker Domac & Alfonso Mendoza, 2002. "Is there Room for Forex Interventions under Inflation Targeting Framework? Evidence from Mexico and Turkey," Discussion Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0206, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  10. Fatum, Rasmus, 2000. "On the effectiveness of sterilized foreign exchange intervention," Working Paper Series, European Central Bank 0010, European Central Bank.
  11. Kim, Suk-Joong & Kortian, Tro & Sheen, Jeffrey, 2000. "Central bank intervention and exchange rate volatility -- Australian evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 10(3-4), pages 381-405, December.
  12. Dubravko Mihaljek, 2005. "Survey of central banks’ views on effects of intervention," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 82-96 Bank for International Settlements.
  13. Hong Liang & Paul Cashin & Hali J. Edison, 2003. "Foreign Exchange Intervention and the Australian Dollar," IMF Working Papers 03/99, International Monetary Fund.
  14. Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2690, C.E.P.R. Discussion Papers.
  15. Jayasri Dutta, 2002. "Dread of Depreciation," IMF Working Papers 02/63, International Monetary Fund.
  16. Aguilar, Javiera & Nydahl, Stefan, 2000. "Central bank intervention and exchange rates: the case of Sweden," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 10(3-4), pages 303-322, December.
  17. Brissimis, Sophocles N. & Chionis, Dionysios P., 2004. "Foreign exchange market intervention: implications of publicly announced and secret intervention for the euro exchange rate and its volatility," Journal of Policy Modeling, Elsevier, Elsevier, vol. 26(6), pages 661-673, September.
  18. Jorge Iván Canales Kriljenko, 2003. "Foreign Exchange Intervention in Developing and Transition Economies," IMF Working Papers 03/95, International Monetary Fund.
  19. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate," IMF Working Papers 00/95, International Monetary Fund.
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Cited by:
  1. Coricelli, Fabrizio & Égert, Balázs & MacDonald, Ronald, 2006. "Monetary transmission mechanism in Central and Eastern Europe: Gliding on a wind of change," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 8/2006, Bank of Finland, Institute for Economies in Transition.

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