 Currency intervention: A case study of an emerging marketRenee Fry-McKibbin and D Sumila Wanaguru Journal of International Money and Finance, 2013, vol. 37, issue C, 25-47 Abstract: Using a unique dataset on daily foreign exchange intervention and a new methodological framework of a latent factor model of central bank intervention, this paper addresses the effects of intervention in an emerging market. Events in financial markets from 2002 to 2010 provide a natural experiment to evaluate the short and medium term objectives of the central bank to contain excessive exchange rate volatility and to accumulate foreign reserves respectively. In the low volatility period in the first part of the sample, the central bank is successful in influencing the currency when pressure is to appreciate, accumulating international reserves. The same model estimated for the global volatility period in the second part of the sample shows the central bank intervening to mitigate excessive exchange rate volatility in line with the short-term objective. The results point to the need to consider the cross currency market interdependence between emerging markets when modeling intervention. Keywords: Foreign exchange intervention; Currency intervention; Exchange rate volatility; Reserve accumulation; Factor model; Emerging markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:37:y:2013:i:c:p:25-47 DOI: 10.1016/j.jimonfin.2013.05.007 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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