The Effect of Foreign Exchange Interventions on Exchange Rate

Derya Aysoy and Guray Kucukkocaoglu

Journal of BRSA Banking and Financial Markets, 2016, vol. 10, issue 1, 65-94

Abstract: This study aims to measure the relationship between foreign exchange interventions applied by CBRT and the exchange rate and exchange rate volatility by using the GARCH and E-GARCH models in the period between January 1, 2004 and June 30, 2015. According to the results of the GARCH model, it has been determined that the purchase and sale interventions do not have a significant effect on exchange rate level and exchange rate volatility for the studied period. As a result of the analysis made by setting periods according to changes in monetary policy between January 1, 2004 and June 30, 2015, significant results have been determined for some periods. One of the most common results is that selling interventions increase the exchange rate level. On the other hand, in accordance with the results of E-GARCH model, in the whole period, it has been seen that purchase interventions have significant and positive effect on exchange rate level. Moreover, it has been observed that sale interventions have significant and positive effect on exchange rate volatility. This effect of sale interventions also has been seen in some periods such as pre and post crisis periods. Therefore, it has been suggested that CBRT should avoid from sale interventions.

Keywords: Foreign Exchange Interventions; Exchange Rates; GARCH; E-GARCH (search for similar items in EconPapers)
JEL-codes: C32 F31 G15 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.bddk.org.tr/Content/docs/bddkDergiEn/dergi_0019_05.pdf (application/pdf)

Related works:
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:bdd:journl:v:10:y:2016:i:1:p:65-94

Access Statistics for this article

More articles in Journal of BRSA Banking and Financial Markets from Banking Regulation and Supervision Agency Contact information at EDIRC.
Bibliographic data for series maintained by Sumeyye Azize CENGIZ ().