The Impact of Central Bank FX Interventions on Currency Components

M. Beine, C.S. Bos, S. Laurent

    Research output: Contribution to JournalArticleAcademic

    Abstract

    This article assesses 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 over the period 1989-2003. We identify the currency components of the mean and volatility processes of exchange rates using the framework developed recently by Bos and Shephard (2006). Our results show that, in general, 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. © 2007 Oxford University Press.
    Original languageEnglish
    Pages (from-to)154-183
    JournalJournal of Financial Econometrics
    Volume5
    Issue number1
    DOIs
    Publication statusPublished - 2007

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