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Title:The impact of FX central bank intervention in a noise trading framework PDF Logo
Authors:Beine, Michel
De Grauwe, Paul
Grimaldi, Marianna
Issue Date:2005
Series/Report no.:CESifo working papers 1520
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:F31
F33
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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