The Determinants of Foreign Exchange Intervention by Central Banks: Evidence from Australia

Suk-Joong Kim () and Jeffrey Sheen

Chapter 1 in Information Spillovers and Market Integration in International Finance:Empirical Analyses, 2018, pp 3-41 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Intervention by the Reserve Bank of Australia on foreign exchange markets from 1983 to 1997 is conjectured to have been determined by exchange rate trend correction, exchange rate volatility smoothing, the US and Australian overnight interest rate differentials, profitability and foreign currency reserve inventory considerations. Using Probit and friction models, we show that these factors were significant influences on intervention behaviour. Consistent with the constraint of intervening only when a clear trend is apparent, we find that above average measures of deviations from trend and of volatility muted the response of the Reserve Bank.

Keywords: Currency Intervention; Macroeconomic News; International Capital Flows; Sovereign Credit Rating (search for similar items in EconPapers)
JEL-codes: F30 (search for similar items in EconPapers)
Date: 2018
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Journal Article: The determinants of foreign exchange intervention by central banks: evidence from Australia (2002)
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