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On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia, 1999-2007

Author

Listed:
  • Juraj Zeman

    (National Bank of Slovakia)

  • Biswajit Banerjee

    (Bank of Slovenia)

  • Ludovit Odor

    (EU Independent Fiscal Institution)

  • William O. Riiska Jr.

    (Hutchin Hill Capital)

Abstract

Based on intra-day high-frequency data, this paper investigates the effect of sterilized interventions on the Slovak koruna/euro exchange rate for different time windows during a period that coincides with Slovakia’s preparation for EU accession and euro adoption. Results confirm a significant relationship between intervention and exchange rate change. The maximum effect of intervention is reflected in the exchange rate change within a couple of hours and the effect over longer time windows weakens only gradually. The initial impact of sales interventions is stronger than that of purchase interventions.

Suggested Citation

  • Juraj Zeman & Biswajit Banerjee & Ludovit Odor & William O. Riiska Jr., 2017. "On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia, 1999-2007," Working and Discussion Papers WP 4/2017, Research Department, National Bank of Slovakia.
  • Handle: RePEc:svk:wpaper:1045
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    References listed on IDEAS

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    2. Tibor Lalinsky & Jaanika Merikull, 2019. "The effect of the single currency on exports: comparative firm-level evidence," Bank of Estonia Working Papers wp2018-10, Bank of Estonia, revised 23 Jan 2019.
    3. Solomiia Brychka & Denys Klynovskyi & Dmytro Krukovets & Artem Oharkov, 2019. "Meta-Analysis: Meta-Analysis: Effect of FX interventions on the exchange rate," Modern Economic Studies, Kyiv School of Economics, vol. 2(1), pages 24-44.
    4. Smita Roy Trivedi, 2020. "The Moses effect: can central banks really guide foreign exchange markets?," Empirical Economics, Springer, vol. 58(6), pages 2837-2865, June.

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    More about this item

    Keywords

    Foreign exchange market intervention; koruna/euro exchange rate; monetary policy framework; ERM II participation; Slovakia;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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