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Is official exchange rate intervention effective?
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Taylor, Mark P. (2003) Is official exchange rate intervention effective? Discussion Paper. London: Centre for Economic Policy Research (Great Britain). Discussion paper (Centre for Economic Policy Research (Great Britain)) (No.375).
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Abstract
I examine the effectiveness of exchange rate intervention within the context of a Markov-switching model for the real exchange rate. The probability of switching between stable and unstable regimes depends non-linearly upon the amount of intervention, the degree of misalignment and the duration of the regime. Applying this to dollar-mark data for the period 1985-98, I find that intervention increases the probability of stability when the rate is misaligned, and that its influence grows with the degree of misalignment. Intervention within a small neighbourhood of equilibrium will result in a greater probability of instability.
Item Type: | Working or Discussion Paper (Discussion Paper) | ||||
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Subjects: | H Social Sciences > HG Finance | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Foreign exchange rates -- Government policy, Markov processes, Economic policy, Nonlinear theories | ||||
Series Name: | Discussion paper (Centre for Economic Policy Research (Great Britain)) | ||||
Publisher: | Centre for Economic Policy Research (Great Britain) | ||||
Place of Publication: | London | ||||
Official Date: | February 2003 | ||||
Dates: |
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Number: | No.375 | ||||
Number of Pages: | 16 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Leverhulme Trust (LT) |
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