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|Title:||On the nonlinear influence of Reserve Bank of Australia interventions on exchange rates |
Ruelke, Jan C.
Taylor, Mark P.
|Issue Date:||2010 |
|Series/Report no.:||Discussion Paper Series 1: Economic Studies 2010,08|
|Abstract:||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.|
|Subjects:||Foreign exchange intervention|
nonlinear mean reversion
|Document Type:||Working Paper|
|Appears in Collections:||Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank|
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