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Effectiveness of Foreign Exchange Intervention: Evidence from Pakistan

Author

Listed:
  • Fayyaz Hussain

    () (State Bank of Pakistan)

  • Abdul Jalil

    (State Bank of Pakistan)

Abstract

This study addresses the question of whether intervention in foreign exchange market in Pakistan has been successful in either altering the exchange rate level or smoothing the exchange rate fluctuations. We apply GARCH model and the methodology of event study on the daily exchange rate and intervention to address the question. We find the evidence of effectiveness of official intervention on exchange rate level as well as on the variance. Length: 25 pages

Suggested Citation

  • Fayyaz Hussain & Abdul Jalil, 2006. "Effectiveness of Foreign Exchange Intervention: Evidence from Pakistan," SBP Working Paper Series 14, State Bank of Pakistan, Research Department.
  • Handle: RePEc:sbp:wpaper:14
    as

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    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp14.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. Kearns, Jonathan & Rigobon, Roberto, 2005. "Identifying the efficacy of central bank interventions: evidence from Australia and Japan," Journal of International Economics, Elsevier, vol. 66(1), pages 31-48, May.
    2. Fatum, Rasmus, 2000. "On the effectiveness of sterilized foreign exchange intervention," Working Paper Series 0010, European Central Bank.
    3. Disyatat, Piti & Galati, Gabriele, 2007. "The effectiveness of foreign exchange intervention in emerging market countries: Evidence from the Czech koruna," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 383-402, April.
    4. Fatum, Rasmus & Hutchison, Michael, 1999. "Is Intervention a Signal of Future Monetary Policy? Evidece from the Federal Funds Futures Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 54-69, February.
    5. 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.
    6. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Intervention; exchange rate; event study; GARCH;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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