IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2005-760.html
   My bibliography  Save this paper

Official Foreign Exchange Interventions in the Czech Republic: Did They Matter?

Author

Listed:
  • Bal??zs ??gert

    ()

  • Lubo?? Kom??rek

    ()

Abstract

This paper studies the impact of daily official foreign exchange interventions on the Czech koruna???s exchange rate vis-??-vis the euro (German mark prior to 1999) from 1997 to 2002. Using both the event study methodology and a variety of GARCH models reveal that central bank interventions, especially koruna purchases were fairly ineffective from 1997 to mid-1998 compared to the size of the interventions. However, from mid-1998 to 2002, koruna sales were surprisingly effective in either smoothing the path of the exchange rate or even reversing the appreciating trend up to 60 days. Higher volatility triggered koruna purchases in the period from 1997 to mid-1998, which in turn leads to higher volatility. This suggests that the CNB tried in vain to calm the markets after the currency crisis. Koruna sales simply yield more forex rate volatility, a by-product of the monetary authorities??? efforts to counter excessive appreciation.

Suggested Citation

  • Bal??zs ??gert & Lubo?? Kom??rek, 2000. "Official Foreign Exchange Interventions in the Czech Republic: Did They Matter?," William Davidson Institute Working Papers Series wp760, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2005-760
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40146/3/wp760.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Elizabeth Brainerd & David M. Cutler, 2005. "Autopsy on an Empire: Understanding Mortality in Russia and the Former Soviet Union," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 107-130, Winter.
    3. Beine, Michel & Benassy-Quere, Agnes & MacDonald, Ronald, 2007. "The impact of central bank intervention on exchange-rate forecast heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 38-63, March.
    4. Brissimis, Sophocles N. & Chionis, Dionysios P., 2004. "Foreign exchange market intervention: implications of publicly announced and secret intervention for the euro exchange rate and its volatility," Journal of Policy Modeling, Elsevier, vol. 26(6), pages 661-673, September.
    5. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate; Have Interventions Mattered?," IMF Working Papers 00/95, International Monetary Fund.
    6. Aguilar, Javiera & Nydahl, Stefan, 2000. "Central bank intervention and exchange rates: the case of Sweden," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 303-322, December.
    7. Ilker Domac & Alfonso Mendoza, 2002. "Is there Room for Forex Interventions under Inflation Targeting Framework? Evidence from Mexico and Turkey," Discussion Papers 0206, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    central bank intervention; foreign exchange intervention; transition economies;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2005-760. 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: (WDI). General contact details of provider: http://edirc.repec.org/data/wdumius.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.