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Effects of Intervention in the Spot Currency Market on the BRL/USD Exchange Rate from 1999 to 2008: an Event Study

Author

Listed:
  • Roberto Meurer

    (Economics Department, Universidade Federal de Santa Catarina)

  • Felipe Wolk Teixeira

    (Universidade Federal de Santa Catarina)

  • Eduardo Cardeal Tomazzia

    (Universidade Federal do Paraná)

Abstract

This study analyses interventions in the Brazilian spot foreign exchange market from 1999 to 2008 and their effects on the R$/US$ exchange rate, using an event study approach. It aims to verify if the foreign exchange interventions have any significant impact on the exchange rate behavior. The period was divided according to a MS-VAR model and analyzed with different criterions. The results indicate that prolonged foreign exchange intervention have a greater effect on the exchange rate behavior, in comparison to short time intervention episodes. The results also point to the existence of quickly dissipating effects on the rate behavior. The creation of a new criterion, based on the analysis of exchange-rate acceleration, shows that the exchange rate is mainly prone to accelerate on leaning with the wind purchase intervention episodes.

Suggested Citation

  • Roberto Meurer & Felipe Wolk Teixeira & Eduardo Cardeal Tomazzia, 2010. "Effects of Intervention in the Spot Currency Market on the BRL/USD Exchange Rate from 1999 to 2008: an Event Study," Brazilian Review of Finance, Brazilian Society of Finance, vol. 8(2), pages 229-254.
    • Handle: RePEc:brf:journl:v:8:y:2010:i:2:p:229-254
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    More about this item

    Keywords

    Foreign Exchange Intervention; Volatility; Exchange rate; Brazil;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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