The Effectiveness Of Reserve Bank Of Australia Foreign Exchange Intervention
Despite the absence of substantial evidence to support the claim that sterilised foreign exchange intervention does systematically affect exchange rates, Central Banks continue to employ this practice. Recent overseas studies strongly support the notion that intervention is effective in the short-term. This paper evaluates the effectiveness of foreign exchange intervention performed by the Reserve Bank of Australia and studies which factors enhance intervention, using an event-study methodology, The period considered includes 1991 - 1998. Evidence is found of the RBA being able to cause reversals in the exchange rate trend and effect the direction of the exchange rate. A number of factors were found to consistently contribute to successful intervention episodes, Intervention effectiveness was enhanced when the actual exchange rate was closer to its fundamental value and the absence of on-going intervention appeared to aid exchange rate smoothing. Evidence is also found in support of the hypothesis that the mechanism involved is that of signalling,
|Date of creation:||2002|
|Contact details of provider:|| Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia|
Phone: +61 3 8344 8560
Fax: +61 3 8344 6899
Web page: http://fbe.unimelb.edu.au/economics
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eijffinger, S.C.W. & Verhagen, W.H., 1997.
"The Advantage of Hiding Both Hands : Foreign Exchange Intervention, Ambiguity and Private Information,"
1997-30, Tilburg University, Center for Economic Research.
- Eijffinger, S.C.W. & Verhagen, W.H., 1998. "The advantage of hiding both hands : Foreign exchange intervention, ambiguity and private information," Other publications TiSEM c1140fba-7b28-4307-9f44-d, Tilburg University, School of Economics and Management.
- Eijffinger, S.C.W. & Verhagen, W.H., 1998. "The advantage of hiding both hands : Foreign exchange intervention, ambiguity and private information," Other publications TiSEM 837fdab8-0c40-4b86-838c-5, Tilburg University, School of Economics and Management.
- 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, vol. 22(3), pages 393-416, June.
- Jeff M. Rogers & Pierre Siklos, 2001. "Foreign Exchange Market Intervention in Two Small Open Economies: The Canadian and Australian Experience," Research Paper Series 57, Quantitative Finance Research Centre, University of Technology, Sydney.
- Baillie, Richard T. & Osterberg, William P., 1997. "Why do central banks intervene?," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 909-919, December.
- G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
- Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
- Rasmus Fatum & Michael M. Hutchison, 2003. "Is sterilised foreign exchange intervention effective after all? an event study approach," Economic Journal, Royal Economic Society, vol. 113(487), pages 390-411, 04.
- Rasmus Fatum & Michael M. Hutchison, "undated". "Is Sterilized Foreign Exchange Intervention Effective After All? An Event Study Approach," EPRU Working Paper Series 99-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- 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, vol. 10(3-4), pages 381-405, December.
- Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-1369, December.
- Almeida, Alvaro & Goodhart, Charles & Payne, Richard, 1998. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 383-408, September.
- Alvaro Almeida & Richard Payne & Charles Goodhart, 1997. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behaviour," FMG Discussion Papers dp258, Financial Markets Group.
When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:849. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Muntasha Meemnun Khan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.