Does Exchange Rate Intervention Trigger Volatility?

M Ramachandran () and G.Ananda Vadivelu ()

Working Papers from eSocialSciences

Abstract: This study aims at investigating two important issues concerning the exchange rate intervention policy of the Reserve Bank of India: (1) whether there is any asymmetry in intervention; and (2) whether intervention triggers volatility. The empirical evidence derived from a class of GARCH and A-PARCH models indicate the latter one fits the data much better than the conventional GARCH models. Further, intervention seems to have increased exchange rate volatility; the official sale of foreign exchange have had a relatively larger impact on exchange volatility than official purchase. This is consistent with the argument that secret intervention creates ambiguity in the market; hence, it results in larger volatility of exchange rate.

Keywords: Exchange rate; foreign exchange reserve; ARCH; GARCH; A-PARCH; intervention policy; Reserve Bank of India; exchange rate volatility; foreign exchange; market (search for similar items in EconPapers)
Date: 2016-01
Note: Institutional Papers
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.esocialsciences.org/Articles/show_Artic ... ionalPapers&aid=8683
Our link check indicates that this URL is bad, the error code is: 503 Service Unavailable

Related works:
Working Paper: Does Exchange Rate Intervention Trigger Volatility (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:8683

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash ().