Realized Volatility as an Instrument to Official Intervention
João Barroso ()
No 363, Working Papers Series from Central Bank of Brazil, Research Department
This paper proposes a novel orthogonality condition based on realized volatility that allows instrumental variable estimation of the effects of spot intervention in foreign exchange markets. We consider parametric and nonparametric instrumental variable estimation, and propose a test based on the average treatment effect of intervention. We apply the method to a unique dataset for the BRL/USD market with full records of spot intervention and net order flow intermediated by the financial system. Overall the average effect of a 1 billion USD sell or buy interventions are close to the 0.51% depreciation or appreciation, respectively, estimated in the linear framework, which is therefore robust to nonlinear interactions. The estimates are a bit lower controlling for derivative operations, which suggests the intervention policies (spot and swaps) are complementary
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
Chapter: Realized Volatility as an Instrument to Official Intervention (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bcb:wpaper:363
Access Statistics for this paper
More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().