Central Bank Intervention and Exchange Rate Volatility in Zambia

Jonathan Mpundu Chipili

Working Papers from African Economic Research Consortium

Abstract: The study analyses the impact of central bank intervention on the volatility of the exchange rate in Zambia over the period 1996-2010. The empirical findings reveal a statistically weak negative impact of intervention on exchange rate volatility. Further, there is little empirical support for a central bank decision to intervene in the foreign exchange market on account of volatility in the exchange rate. The results seem to suggest that the Bank of Zambia should not rely entirely on intervention to dampen volatility in the exchange rate; domestic policy changes are required to reinforce intervention. Triggers for intervention should also be re-examined within the context of the exchange rate policy objective.

Date: 2014-04
Note: African Economic Research Consortium
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Persistent link: https://EconPapers.repec.org/RePEc:aer:wpaper:9ed7bead-7569-4727-8d4f-dd546fa70877

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