Central bank intervention and foreign exchange markets
In this article we examine the sensitivity of the foreign exchange market to central bank intervention. Using a time varying Markov switching model we separate periods of relatively stable market conditions from volatile periods and look at the dynamic of the causality effect under different market...
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ftrepec:oai:RePEc:taf:apfiec:v:19:y:2009:i:17:p:1417-1432 2023-05-15T16:49:23+02:00 Central bank intervention and foreign exchange markets Dave Seerattan Nicola Spagnolo http://www.tandfonline.com/doi/abs/10.1080/00036840902817789 unknown http://www.tandfonline.com/doi/abs/10.1080/00036840902817789 article ftrepec 2020-12-04T13:36:53Z In this article we examine the sensitivity of the foreign exchange market to central bank intervention. Using a time varying Markov switching model we separate periods of relatively stable market conditions from volatile periods and look at the dynamic of the causality effect under different market conditions. The analysis is conducted for three developing markets, namely Croatia, Iceland and Jamaica and one developed market, Australia, for comparative purposes. We show that direct intervention affects the probability of switching between states in the developed market but has little or no effect in the developing markets reviewed. We argue that this is due to specific intervention practices rather than market characteristics. Additionally, we find that intervention purchases and sales tend to have different effects. Monetary policy is also found to impact the probability of transitioning from one market state to another, sometimes detracting from the strength of the influence of direct intervention on the transition probabilities. Article in Journal/Newspaper Iceland RePEc (Research Papers in Economics) |
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Open Polar |
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RePEc (Research Papers in Economics) |
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unknown |
description |
In this article we examine the sensitivity of the foreign exchange market to central bank intervention. Using a time varying Markov switching model we separate periods of relatively stable market conditions from volatile periods and look at the dynamic of the causality effect under different market conditions. The analysis is conducted for three developing markets, namely Croatia, Iceland and Jamaica and one developed market, Australia, for comparative purposes. We show that direct intervention affects the probability of switching between states in the developed market but has little or no effect in the developing markets reviewed. We argue that this is due to specific intervention practices rather than market characteristics. Additionally, we find that intervention purchases and sales tend to have different effects. Monetary policy is also found to impact the probability of transitioning from one market state to another, sometimes detracting from the strength of the influence of direct intervention on the transition probabilities. |
format |
Article in Journal/Newspaper |
author |
Dave Seerattan Nicola Spagnolo |
spellingShingle |
Dave Seerattan Nicola Spagnolo Central bank intervention and foreign exchange markets |
author_facet |
Dave Seerattan Nicola Spagnolo |
author_sort |
Dave Seerattan |
title |
Central bank intervention and foreign exchange markets |
title_short |
Central bank intervention and foreign exchange markets |
title_full |
Central bank intervention and foreign exchange markets |
title_fullStr |
Central bank intervention and foreign exchange markets |
title_full_unstemmed |
Central bank intervention and foreign exchange markets |
title_sort |
central bank intervention and foreign exchange markets |
url |
http://www.tandfonline.com/doi/abs/10.1080/00036840902817789 |
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Iceland |
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Iceland |
op_relation |
http://www.tandfonline.com/doi/abs/10.1080/00036840902817789 |
_version_ |
1766039526303596544 |