Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32548
Authors: 
Reitz, Stefan
Ruelke, Jan C.
Taylor, Mark P.
Year of Publication: 
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
market microstructure
smooth transition
nonlinear mean reversion
JEL: 
C10
F31
F41
ISBN: 
978-3-86558-611-7
Document Type: 
Working Paper

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