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The impact of Central Bank FX interventions on currency components

Listed author(s):
  • Michel Beine
  • Charles Bos
  • Sébastien Laurent

This article assesses the impact of official FOREX interventions of the three major central banks in terms of the dynamics of the currency components of the major exchange rates over the period 1989--2003. We identify the currency components of the mean and volatility processes of exchange rates using the framework developed recently by Bos and Shephard (2006). Our results show that, in general, concerted interventions tend to affect the dynamics of both currency components of the exchange rate. In contrast, unilateral interventions are found to primarily affect the currency of the central bank present in the market. Our findings also emphasize a role for interventions conducted by these central banks on other related FOREX markets. Copyright 2007, Oxford University Press.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/10419.

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Date of creation: 2007
Publication status: Published in: Journal of Financial Econometrics (2007) v.5 n° 1,p.154-183
Handle: RePEc:ulb:ulbeco:2013/10419
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Web page: http://difusion.ulb.ac.be

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  1. Richard Payne, 2001. "A Transaction Level Study of the Effects of Central Bank Intervention on Exchange Rates," FMG Discussion Papers dp355, Financial Markets Group.
  2. Michel Beine & Sébastien Laurent & Christelle Lecourt, 2003. "Official central bank interventions and exchange rate volatility: evidence from a regime-switching analysis," ULB Institutional Repository 2013/10437, ULB -- Universite Libre de Bruxelles.
  3. Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290.
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