Exchange rate intervention

2007 ◽  
Vol 12 (2) ◽  
pp. 107-108 ◽  
Author(s):  
Christopher J. Neely ◽  
Mark P. Taylor
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Intervention

scholarly journals Optimal Foreign Exchange Rate Intervention in Lévy Markets

2014 ◽  
Vol 2014 ◽  
pp. 1-8 ◽  
Author(s):  
Masimba Aspinas Mutakaya ◽  
Eriyoti Chikodza ◽  
Edward T. Chiyaka
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Impulse Control ◽  
Value Function ◽  
Quasivariational Inequalities ◽  
Expected Number ◽  
A Value ◽  
The Exchange Rate ◽  
Intervention Costs ◽  
Exchange Rate Intervention

This paper considers an exchange rate problem in Lévy markets, where the Central Bank has to intervene. We assume that, in the absence of control, the exchange rate evolves according to Brownian motion with a jump component. The Central Bank is allowed to intervene in order to keep the exchange rate as close as possible to a prespecified target value. The interventions by the Central Bank are associated with costs. We present the situation as an impulse control problem, where the objective of the bank is to minimize the intervention costs. In particular, the paper extends the model by Huang, 2009, to incorporate a jump component. We formulate and prove an optimal verification theorem for the impulse control. We then propose an impulse control and construct a value function and then verify that they solve the quasivariational inequalities. Our results suggest that if the expected number of jumps is high the Central Bank will intervene more frequently and with large intervention amounts hence the intervention costs will be high.

scholarly journals Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?

2001 ◽  
Vol 39 (3) ◽  
pp. 839-868 ◽  
Author(s):  
Lucio Sarno ◽  
Mark P Taylor
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Coordination Failure ◽  
Exchange Rate Intervention

Our paper assesses progress made by the profession in understanding whether and how exchange rate intervention works. We review theory and evidence on official intervention, concentrating primarily on work published in the last decade or so. We conclude that, unlike the profession's consensus of the 1980s, official intervention can be effective, especially as a signal of policy intentions and when publicly announced and concerted. We note an apparent empirical puzzle concerning the secrecy of much intervention and suggest another way for intervention to be effective which has received little attention in the literature, namely by remedying a coordination failure in the foreign exchange market.

Soft versus hard targets for exchange rate intervention

1997 ◽  
Vol 12 (24) ◽  
pp. 13-52 ◽  
Author(s):  
Leonardo Bartolini ◽  
Alessandro Prati
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Intervention
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