Volatility spillover between the RBI’s intervention and exchange rate

Linkon Mondal ()

International Economics and Economic Policy, 2014, vol. 11, issue 4, 549-560

Abstract: This study examines the effectiveness of the Reserve Bank of India’s (RBI) intervention policy in the foreign exchange market. An attempt is made to capture volatility spillovers between the RBI’s intervention and exchange rate. The results indicate that the past volatility of intervention has a positive impact on the present volatility of the exchange rate. Similarly the past volatility of the exchange rate, increases the present volatility of intervention. The volatility of the exchange rate is more sensitive to its past shock than the past shock of an intervention. Similarly, the volatility of intervention is more sensitive to the past volatility of exchange rate compared to the past volatility of intervention. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Exchange rate intervention; Bivariate GARCH model; Volatility spillover (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10368-013-0257-4

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