Foreign exchange interventions in Brazil and their impact on volatility: A quantile regression approach
Alessandra Pasqualina Viola,
Marcelo Cabus Klotzle,
Antonio Carlos Figueiredo Pinto and
Claudio Henrique da Silveira Barbedo
Research in International Business and Finance, 2019, vol. 47, issue C, 251-263
This work aims to analyze the interventions conducted by the Central Bank of Brazil in the Brazilian foreign exchange market from 2003 to 2014. For this purpose, we use quantile regression analysis and some of its new formulas to examine the effects of government interventions on exchange rate volatility. In particular, we apply quantile regression with instrumental variables to address the existing endogeneity problem. The results differ when using daily interventions versus the net accumulated position as explanatory variables. The findings illuminate a new way to analyze data that do not have completely random behavior and demonstrate different impacts (slope coefficients) of the exchange rate interventions along the distribution on exchange rate volatility.
Keywords: Foreign exchange intervention; Quantile regression; Volatility; Endogeneity; Foreign exchange market; GARCH (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:47:y:2019:i:c:p:251-263
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