The Indian exchange rate and central bank action: A GARCH analysis

Ashima Goyal and Sanchit Arora
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Sanchit Arora: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: We study, with daily and monthly data sets, the impact of conventional monetary policy measures such as interest rates, intervention and other quantitative measures, and of Central Bank communication on exchange rate volatility. Since India has a managed float, we also test if the measures affect the level of the exchange rate. Using dummy variables in the best of an estimated family of GARCH models, we find forex market intervention to be the most effective of all the CB instruments evaluated for the period of analysis. We also find that CB communication has a large potential but was not effectively used.

Keywords: exchange rate volatility; monetary policy; intervention; communication; GARCH (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-07
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Indian exchange rate and Central Bank action: An EGARCH analysis (2012)
Working Paper: The Indian Exchange Rate and Central Bank Action: A GARCH Analysis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2010-009

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