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

Michel Beine, Jérôme Lahaye, Sébastien Laurent, Christopher Neely and Franz Palm
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Jérôme Lahaye: CeReFiM, University of Namur and CORE, Belgium, Postal: CeReFiM, University of Namur and CORE, Belgium

International Journal of Finance & Economics, 2007, vol. 12, issue 2, 201-223

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. Copyright © 2007 John Wiley & Sons, Ltd.

Date: 2007
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Working Paper: Central bank intervention and exchange rate volatility, its continuous and jump components (2007)
Working Paper: Central Bank intervention and exchange rate volatility: its continuous and jump components (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ijf:ijfiec:v:12:y:2007:i:2:p:201-223

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DOI: 10.1002/ijfe.330

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