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Author: Ms.Hali J. Edison Publisher: International Monetary Fund ISBN: 1451852290 Category : Business & Economics Languages : en Pages : 31
Book Description
Since the Australian dollar was floated in December 1983, the Australian central bank (Reserve Bank of Australia) has actively intervened in the foreign exchange market. Using daily exchange rate and official intervention data from January 1984 to December 2001, this paper examines what effects, if any, foreign exchange operations by the Reserve Bank of Australia (RBA) have had on the level and volatility of the Australian dollar exchange rate. First, using an event study we evaluate the effectiveness of intervention by examining its direct effect on the level of the exchange rate. We find that over the period 1997-2001, the RBA has had some success in its intervention operations, by moderating the depreciating tendency of the Australian dollar. Second, we investigate the effects of RBA intervention policies on exchange rate volatility over the floating rate period. Our results indicate that intervention operations tend to be associated with an increase in exchange rate volatility, which suggests that official intervention may have added to market uncertainty. Overall, the effects of RBA intervention are quite modest on both the level and the volatility of the Australian dollar exchange rate.
Author: Ms.Hali J. Edison Publisher: International Monetary Fund ISBN: 1451852290 Category : Business & Economics Languages : en Pages : 31
Book Description
Since the Australian dollar was floated in December 1983, the Australian central bank (Reserve Bank of Australia) has actively intervened in the foreign exchange market. Using daily exchange rate and official intervention data from January 1984 to December 2001, this paper examines what effects, if any, foreign exchange operations by the Reserve Bank of Australia (RBA) have had on the level and volatility of the Australian dollar exchange rate. First, using an event study we evaluate the effectiveness of intervention by examining its direct effect on the level of the exchange rate. We find that over the period 1997-2001, the RBA has had some success in its intervention operations, by moderating the depreciating tendency of the Australian dollar. Second, we investigate the effects of RBA intervention policies on exchange rate volatility over the floating rate period. Our results indicate that intervention operations tend to be associated with an increase in exchange rate volatility, which suggests that official intervention may have added to market uncertainty. Overall, the effects of RBA intervention are quite modest on both the level and the volatility of the Australian dollar exchange rate.
Author: Suk-Joong Kim Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
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 U.S. 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.
Author: Jonathan Kearns Publisher: ISBN: Category : Banks and banking, Central Languages : en Pages : 48
Book Description
The endogeneity of exchange rates and intervention has long plagued studies of the effectiveness of central banks actions in foreign exchange markets. Researchers have either excluded contemporaneous intervention, so that their explanators are predetermined, or obtained a small, and typically incorrectly signed, coefficient on contemporaneous intervention. Failing to account for the endogeneity, when central banks lean against the wind and trade strategically, will likely result in a large downward bias to the coefficient on contemporaneous intervention -- explaining the negative coefficient frequently obtained. We use an alternative identification assumption, a change in Reserve Bank of Australia intervention policy, that allows us to estimate, using simulated GMM, a model that includes the contemporaneous impact of intervention. There are three main results. Our point estimates suggest that central bank intervention has a economically significant contemporaneous effect. A $US100m purchase of the domestic currency will appreciate the exchange rate by 1.35 to 1.81 per cent. This estimate is remarkably similar to the calibration conducted by Dominguez and Frankel (1993), who themselves noted their estimate was larger than previous empirical findings. Secondly, the vast majority of the effect of an intervention on the exchange rate is found to occur during the day in which it is conducted, with only a smaller impact on subsequent days. Finally, we confirm findings that Australian central bank intervention policy can be characterized by leaning aginst the wind.
Author: Jan C. Ruelke Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
This paper applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate in the sense that mean reversion increases with the degree of exchange rate misalignment. Second, a STR-GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders' confidence in fundamental analysis. This in line with the so-called coordination channel of intervention effectiveness.
Author: Felix Hüfner Publisher: Springer Science & Business Media ISBN: 3790826723 Category : Business & Economics Languages : en Pages : 180
Book Description
Foreign exchange intervention is frequently being used by central banks in countries which have a floating exchange rate. Most theoretical monetary policy models, however, do not take this phenomenon into account. This book contributes to close this gap between theory and practice by interpreting foreign exchange intervention as an additional monetary policy instrument for inflation targeting central banks. In-depth empirical analyses of the foreign exchange operations and interest rate policy of five inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom) demonstrate how foreign exchange intervention is used in practice.
Author: Neil Dias Karunaratne Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This study reviews the rationale and mechanics of exchange rate intervention by the Reserve Bank of Australia (RBA) during the post-float period 1983Q4-1993Q2. The paper discusses the various channels through RBA intervenes leading to the level of exchange rate outcomes. The salient features of Australia's post-float intervention experience are surveyed by identifying distinct phases in which they occur during the study period. A main aim of the study is to shed light on the controversy regarding the effectiveness or RBA intervention from a long-run perspective. Some analysts have claimed that RBA interventions have been ineffective and compared it to the task of Sisyphus. An optimal control model is conceptualized to test the proposition of ineffectiveness of the RBA intervention or the Sisyphus hypothesis. Multicontegration techniques are used to test whether the stochastic process proxying RBA interventions exhibit long-run equilibrium relations or optimal proportional control. The test results favour cointegration or optimal control are on balance unvfaourable to the Sisyphus hypothesis.
Author: Ms.Hali J. Edison
Author: Ms.Hali J. Edison
Author: Suk-Joong Kim
Author: Suk-Joong Kim
Author: Suk-Joong Kim
Author: Jonathan Kearns
Author: Stephen Grenville
Author: Jan C. Ruelke
Author: Felix Hüfner
Author: Zoe McLaren
Author: Neil Dias Karunaratne