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Spill-over dynamics of central bank interventions

Author

Listed:
  • Frank Westerhoff

    () (University of Osnabrueck, Department of Economics)

  • Cristian Wieland

    (University of Osnabrueck, Department of Economics)

Abstract

Central banks frequently intervene in foreign exchange markets to reduce volatility or to correct misalignments. Such operations may be successful if they drive away destabilizing speculators. However, the speculators do not simply vanish but may reappear on other foreign exchange markets. Using a model in which traders are able to switch between foreign exchange markets, we demonstrate that while a central bank indeed has several means at hand to stabilize a specific market, the variability of the other markets depends on how the interventions are implemented.

Suggested Citation

  • Frank Westerhoff & Cristian Wieland, "undated". "Spill-over dynamics of central bank interventions," Modeling, Computing, and Mastering Complexity 2003 21, Society for Computational Economics.
  • Handle: RePEc:sce:cplx03:21
    as

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    References listed on IDEAS

    as
    1. Christopher J. Neely, 2001. "The practice of central bank intervention: looking under the hood," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-10.
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    Cited by:

    1. Westerhoff Frank H., 2008. "The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(2-3), pages 195-227, April.

    More about this item

    Keywords

    foreign exchange markets; central bank intervention; technical and fundamental analysis;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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