The Impact of Central Bank FX Interventions on Currency Components

Michel Beine, Charles Bos and Sebastian Laurent ()
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Sebastian Laurent: University of Namur, and CORE

No 05-103/4, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper led to a publication in 'Journal of Financial Econometrics' , 2007, 5(1), 154-183.

This paper is the first attempt to assess the impact of official FOREX interventions of the three major central banks in terms of the dynamics of the currency components of the major exchange rates (EUR/USD and YEN/USD) over the period 1989-2003. We identify the currency components of the mean and the volatility processes of exchange rates using the recent Bayesian framework developed by Bos and Shephard (2004). Our results show that in general, the concerted interventions tend to affect the dynamics of both currency components of the exchange rate. In contrast, unilateral interventions are found to primarily affect the currency of the central bank present in the market. Our findings also emphasize a role for interventions conducted by these central banks on other related FOREX markets.

Keywords: Central banks; interventions; exchange rates; stochastic volatility; state space (search for similar items in EconPapers)
JEL-codes: C11 C32 E58 F31 (search for similar items in EconPapers)
Date: 2005-11-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://papers.tinbergen.nl/05103.pdf (application/pdf)

Related works:
Journal Article: The Impact of Central Bank FX Interventions on Currency Components (2007)
Working Paper: The impact of Central Bank FX interventions on currency components (2007)
Working Paper: The impact of Central Bank FX interventions on currency components (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20050103

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