Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/218975
Authors: 
Menkhoff, Lukas
Rieth, Malte
Stöhr, Tobias
Year of Publication: 
2020
Series/Report no.: 
DIW Discussion Papers 1854
Abstract: 
Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Generally, we find, for freely floating currencies, that FX intervention shocks significantly affect exchange rates and that this impact persists for months. The signaling channel dominates the portfolio channel. Moreover, interest rates tend to fall in response to sales of the domestic currency, whereas stock prices of large (exporting) firms increase after devaluation of the domestic currency.
Subjects: 
foreign exchange intervention
structural VAR
exchange rates
interest rates
stock prices
JEL: 
F31
F33
E58
Document Type: 
Working Paper

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