Determinants and Effectiveness of Foreign Exchange Market Intervention in Georgia

Olga Loiseau-Aslanidi

Emerging Markets Finance and Trade, 2011, vol. 47, issue 4, 75-95

Abstract: This paper uses unique daily data to study the determinants and the effectiveness of partially sterilized intervention by the National Bank of Georgia (NBG) during the period 1996-2007. Detected structural breaks in the exchange rate and the intervention series are important for NBG intervention motives and effectiveness. The central bank reaction functions indicate that the NBG leans against the wind while smoothing the exchange rate. The intended effect on the level of the exchange rate is observed the day after intervention is conducted. However, the conditional volatility increases with intervention.

Keywords: determinants of intervention; effectiveness of intervention; foreign exchange intervention; Georgia; structural break (search for similar items in EconPapers)
Date: 2011
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