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Do Central Bank Interventions increase exchange rate forecasts heterogeneity? New evidence from survey data

Authors
  • Beine, Michel
  • Bénassy, A.
  • Mc Donald, R.
Publication Date
Jan 01, 2007
Source
ORBilu
Keywords
Language
English
License
Unknown
External links

Abstract

We analyze the relationship between interventions and volatility at daily and intra-daily frequencies for the two major exchange rate markets. Using recent econometric methods to estimate realized volatility, we employ bipower variation to decompose this volatility into a continuously varying and jump component. Analysis of the timing and direction of jumps and interventions imply that coordinated interventions tend to cause few, but large jumps. Most coordinated operations explain, statistically, an increase in the persistent (continuous) part of exchange rate volatility. This correlation is even stronger on days with jumps.

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