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Can intervention indices detect central bank's actual intervention behaviour?

  • Yu-Ming Hsiao
  • Sheng-Chieh Pan
  • Po-Chin Wu
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    This article employs the Weymark (1997) and Baig et al. (2003) models to evaluate the central bank's intervention behaviour and utilizes ex post intervention news to check the models' estimation results. Empirical results show that the Baig et al. model's evaluation performance in intervention behaviour is inferior to the Weymark model. The scale of intervention index is not an excellent indicator to detect intervention behaviour. Intervention indices and intervention news all support that the intervention frequency in expansion period is higher than in recession period and in face of fatal events the intervention exhibits cluster phenomenon.

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    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 17 (2010)
    Issue (Month): 15 ()
    Pages: 1525-1530

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    Handle: RePEc:taf:apeclt:v:17:y:2010:i:15:p:1525-1530
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    1. Shiu-Sheng Chen & Kenshi Taketa, 2007. "Assessment Of Weymark'S Measures Of Exchange Market Intervention: The Case Of Japan," Pacific Economic Review, Wiley Blackwell, vol. 12(5), pages 545-558, December.
    2. Weymark, Diana N, 1997. "Measuring the degree of exchange market intervention in a small open economy," Journal of International Money and Finance, Elsevier, vol. 16(1), pages 55-79, February.
    3. Baig, Mirza Allim & Narasimhan, V. & Ramachandran, M., 2003. "Exchange market pressure and the Reserve Bank of India's intervention activity," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 727-748, November.
    4. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
    5. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Working Papers 2005-030, Federal Reserve Bank of St. Louis.
    6. Andreas M. Fischer, 2005. "On the Inadequacy of Newswire Reports for Empirical Research on Foreign Exchange Interventions," Working Papers 2005-02, Swiss National Bank.
    7. Evan Tanner, 1999. "Exchange Market Pressure and Monetary Policy; Asia and Latin America in the 1990's," IMF Working Papers 99/114, International Monetary Fund.
    8. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-48, September.
    9. Takatoshi Ito, 2007. "Myths and reality of foreign exchange interventions: an application to Japan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 133-154.
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