Martingale Property of Exchange Rates and Central Bank Interventions

2001 ◽  
Author(s):  
Kamil Yilmaz
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Martingale Property ◽  
Central Bank Interventions

scholarly journals An Interpretation of Recent Research on Exchange Rate Target Zones

1992 ◽  
Vol 6 (4) ◽  
pp. 119-144 ◽  
Author(s):  
Lars E. O Svensson
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Interest Rates ◽  
Empirical Research ◽  
Target Zones ◽  
The Difference ◽  
Exchange Rate Target Zones ◽  
Main Ideas ◽  
Central Bank Interventions

How do exchange rate bands work compared to completely fixed rates (between realignments); or, more precisely, what are the dynamics of exchange rates, interest rates, and central bank interventions within exchange rate bands? Does the difference between bands and completely fixed exchange rates matter, and if so, which of the two arrangements is best; or, more precisely, what are the tradeoffs that determine the optimal bandwidth? This article will present an interpretation of some selected recent theoretical and empirical research on exchange rate target zones, with emphasis on main ideas and results and without technical detail.

Stochastic impulse control of exchange rates with Freidlin–Wentzell perturbations

2017 ◽  
Vol 54 (1) ◽  
pp. 23-41 ◽  
Author(s):  
Gregory Gagnon
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Impulse Control ◽  
Sample Path ◽  
Value Functions ◽  
Target Zone ◽  
Sample Path Analysis ◽  
A Value ◽  
Stochastic Impulse Control ◽  
Central Bank Interventions

AbstractThis paper pioneers a Freidlin–Wentzell approach to stochastic impulse control of exchange rates when the central bank desires to maintain a target zone. Pressure to stimulate the economy forces the bank to implement diffusion monetary policy involving Freidlin–Wentzell perturbations indexed by a parameter ε∈ [0,1]. If ε=0, the policy keeps exchange rates in the target zone for all times t≥0. When ε>0, exchange rates continually exit the target zone almost surely, triggering central bank interventions which force currencies back into the zone or abandonment of all targets. Interventions and target zone deviations are costly, motivating the bank to minimize these joint costs for any ε∈ [0,1]. We prove convergence of the value functions as ε→0 achieving a value function approximation for small ε. Via sample path analysis and cost function bounds, intervention followed by target zone abandonment emerges as the optimal policy.

Central bank interventions and jumps in double long memory models of daily exchange rates

2003 ◽  
Vol 10 (5) ◽  
pp. 641-660 ◽  
Author(s):  
Michel Beine ◽  
Sébastien Laurent
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Long Memory ◽  
Memory Models ◽  
Central Bank Interventions

Trading Rule Profitability and Central Bank Interventions in the Dollar-Deutsch mark Market / Der Zusammenhang zwischen der Profitabilität einer technischen Handelsstrategie und Zentralbankinterventionen im D-Mark/US-Dollar-Markt

2004 ◽  
Vol 224 (6) ◽  
Author(s):  
Michael Frenkel ◽  
Georg Stadtmann
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Moving Average ◽  
Trading Rule ◽  
Technical Trading ◽  
Var Analysis ◽  
Us Dollar ◽  
Central Bank Interventions ◽  
The Relationship

SummaryThe paper examines the relationship between central bank interventions in the dollar-deutschmark market and the profitability of technical trading for the period 1979-1992. While previous work on this topic focused on the interventions of the Fed, we include data on Bundesbank interventions and show that there were several similarities. Our analysis yields the result that eliminating days of Fed and Bundesbank interventions causes a simple moving average trading rule to become unprofitable. In addition, we study the dynamics of intra-day exchange rates following and preceding interventions and provide a VAR analysis on the relationship between interventions and the change in the exchange rate. The results suggest that interventions did not cause the high profits of technical trading on intervention days frequently found in other studies.

Central Bank Interventions and Implied Exchange Rate Correlations

2007 ◽  
Author(s):  
Jussi Nikkinen ◽  
Sami Vähämaa
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Central Bank Interventions

scholarly journals Modeling Sources of Asymmetry in the Volatility of the Moroccan Dirham Exchange Rate

2021 ◽  
Vol 8 (4) ◽  
pp. 31
Author(s):  
KHATTAB Ahmed ◽  
SALMI Yahya
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Selection Criterion ◽  
Econometric Models ◽  
Interbank Market ◽  
Foreign Exchange Reserves ◽  
Central Bank Intervention ◽  
The Exchange Rate

The main objective of this paper is to study the sources of asymmetry in the volatility of the bilateral exchange rates of the Moroccan dirham (MAD), against the EUR and the USD using the asymmetric econometric models of the ARCH-GARCH family. An empirical analysis was conducted on daily central bank data from March 2003 to March 2021, with a sample size of 4575 observations. Central bank intervention in the foreign exchange (interbank) market was found to affect the asymmetry in the volatility of the bilateral EUR/MAD and USD/MAD exchange rates. Specifically, sales of foreign exchange reserves by the monetary authority cause a fall in the exchange rate, which means that the market response to shocks is asymmetric. Finally, the selection criterion (AIC) allowed us to conclude that the asymmetric model AR(1)-TGARCH(1,1) is adequate for modeling the volatility of the exchange rate of the Moroccan dirham.

scholarly journals Central bank transparency and the volatility of exchange rates

2018 ◽  
Vol 89 ◽  
pp. 23-49 ◽  
Author(s):  
Stefan Eichler ◽  
Helge C.N. Littke
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Central Bank Transparency
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