Central bank intervention and exchange rate volatility its continuous and jump components

M. Beine, J. Lahaye, S. Laurent, C.J. Neely, F.C. Palm

Research output: Contribution to journalArticleAcademicpeer-review

23 Citations (Scopus)

Abstract

We analyse 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 bi-power 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.
Original languageEnglish
Pages (from-to)201-223
JournalInternational Journal of Finance & Economics
Volume22
DOIs
Publication statusPublished - 1 Jan 2007

Cite this