On the nonlinear influence of Reserve Bank of Australia interventions on exchange rates

Stefan Reitz, Jan C. Ruelke and Mark Taylor

No 2010,08, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: This paper applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate in the sense that mean reversion increases with the degree of exchange rate misalignment. Second, a STR-GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders' confidence in fundamental analysis. This in line with the so-called coordination channel of intervention effectiveness.

Keywords: Foreign exchange intervention; market microstructure; smooth transition; nonlinear mean reversion (search for similar items in EconPapers)
JEL-codes: C10 F31 F41 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-mst
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Related works:
Journal Article: On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:201008

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