Is official exchange rate intervention effective?
Taylor, Mark P., 1958- (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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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)|
|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|
|Number of Pages:||16|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Leverhulme Trust (LT)|
Allen, Helen, and Mark P. Taylor (1990), “Charts, Noise and Fundamentals in
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