The Impact of FX Central Bank Intervention in a Noise Trading Framework

Michel Beine, Paul De Grauwe and Marianna Grimaldi

No 1520, CESifo Working Paper Series from CESifo

Abstract: In this paper we investigate the effects of central bank interventions (CBI) in a noise trading model with chartists and fundamentalists. We first estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a fundamental value. Then, we investigate the role of central bank interventions in explaining the switching properties between the two types of agents. We find evidence that in the medium run, interventions increase the proportion of fundamentalists and therefore exert some stabilizing influence on the exchange rate.

JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-fmk, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Chapter: The Impact of FX Central Bank Intervention in a Noise Trading Framework (2014)
Journal Article: The impact of FX central bank intervention in a noise trading framework (2009)
Working Paper: The impact of FX Central Bank Intervention in a Noise Trading Framework (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1520

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