The Impact of Central Bank FX Interventions on Currency Components

Arbeitspapier

This paper is the first attempt to assess 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 (EUR/USD and YEN/USD) over the period 1989-2003. We identify the currency components of the mean and the volatility processes of exchange rates using the recent Bayesian framework developed by Bos and Shephard (2004). Our results show that in general, the 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 05-103/4

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Central Banks and Their Policies ; Foreign Exchange
• Subject: Central banks ; interventions ; exchange rates ; stochastic volatility ; state space

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Beine, Michel ; Bos, Charles S. ; Laurent, Sebastian
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/86283
• Last update: 10.03.2025, 11:41 AM CET