Central bank FOREX interventions assessed using realized moments |
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| Authors: | Michel Beine Sébastien Laurent Franz C Palm |
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| Institution: | 1. School of Business, Stevens Institute of Technology, 1 Castle Point on Hudson, Hoboken, NJ 07310, USA;2. School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, GA 30318, USA;3. Department of Mathematics, Marist College, 3399 North Road, Poughkeepsie, NY 12601, USA;1. DRM Finance, Université Paris Dauphine, Place du Maréchal de Lattre de Tassigny, 75775 Paris Cedex 16, France;2. IPAG Business School (IPAG Lab), 184 Boulevard Saint-Germain, 75006 Paris, France |
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| Abstract: | This paper assesses the impact of G3 official central bank interventions on daily realized moments of DEM/USD exchange rate returns obtained from intraday data, 1989–2001. Event studies of the realized moments for the intervention day, the days preceding and following the intervention illustrate the shape of this impact. Rolling regressions results for an AR(FI)MA model for realized moments are used to measure the impact and its significance. The analysis confirms previous empirical findings of a temporary increase of volatility after a coordinated central bank intervention. It highlights new findings on the timing and the temporary nature of the impact of coordinated interventions on exchange rate volatility and on cross-moments between foreign exchange markets. |
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