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Central Bank Intervention (central + bank_intervention)
Selected AbstractsSpillover Dynamics of Central Bank InterventionsGERMAN ECONOMIC REVIEW, Issue 4 2004Frank H. Westerhoff Foreign exchange markets; central bank intervention; technical and fundamental analysis 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. [source] Central bank interventions in industrialized countries: a characterization based on survey resultsINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2006Christelle Lecourt Abstract This paper presents the findings from a survey on central banks' FOREX intervention practices in industrialized countries over the last decade. The answers of responding monetary authorities are examined with respect to available data and literature. Our findings indicate that interventions usually take place during normal working hours while central banks show some preference for dealing with major domestic banks. Correction or prevention of long-term misalignments of exchange rates with their fundamental values and, to a lesser extent, the reduction of exchange rate volatility is the first motive given for intervention. The signalling effect of interventions is consistently put forward as the main channel through which interventions work. Copyright © 2006 John Wiley & Sons, Ltd. [source] Spillover Dynamics of Central Bank InterventionsGERMAN ECONOMIC REVIEW, Issue 4 2004Frank H. Westerhoff Foreign exchange markets; central bank intervention; technical and fundamental analysis 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. [source] Devaluation Expectations and the Stock Market: a new measure and an application to Mexico 1994/95INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2002Torbjörn Becker Abstract This paper develops a market-based measure of devaluation expectations derived from the relative stock market performance of companies with different exposures of current and future profits to exchange-rate changes. The measure can be viewed as a complement to measures of devaluation expectations based on interest-rate-parity conditions, survey data or macroeconomic models. Some of the benefits of the measure are that data are available on a timely basis and that the stock market has traditionally been free of central bank intervention. As an illustration, we examine the Mexican devaluation of 1994. Contrary to what might have been expected given the alleged peso overvaluation, high-net-exporting firms outperformed the market beginning in late 1993. This pattern is, on the other hand, consistent with forward-looking stock prices that assigned an increasing probability to a devaluation benefiting exporting firms. Copyright © 2002 John Wiley & Sons, Ltd. [source] Discrete policy interventions and rational forecast errors in foreign exchange markets: the uncovered interest parity hypothesis revisitedINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2002Dimitris G. Kirikos Abstract This paper combines policy response explanations of the uncovered interest parity puzzle with a time series approach that accounts for discrete central bank interventions. When monetary authorities manage the interest rate differential through an anti-inflationary policy rule, which allows for discrete shifts, then a stochastic segmented trends representation seems appropriate for the exchange rate and the interest rate differential series. In this setting, rational forecast errors are possible, and a test of the uncovered parity hypothesis, based on the cross-equation restrictions on a Markov switching process, suggests that the parity relationship cannot be rejected for three European currencies vis-à-vis the US dollar. Copyright © 2002 John Wiley & Sons, Ltd. [source] HIGH-FREQUENCY ANALYSIS OF FOREIGN EXCHANGE INTERVENTIONS: WHAT DO WE LEARN?JOURNAL OF ECONOMIC SURVEYS, Issue 1 2010Lukas Menkhoff Abstract The high-frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run as they are regarded as information; but they can reduce volatility overall. Ways of transmission may reach beyond the signalling channel and also include the portfolio balance and a damping channel. Finally, interventions are more successful if they obey certain conditions, such as being coordinated among central banks and going with the market and fundamentals. [source] | ||||||||||