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The dynamic impact of FX interventions on financial markets

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Bibliographic Details
Authors and Corporations: Menkhoff, Lukas (Author), Rieth, Malte (Author), Heidland, Tobias (Author)
Other Authors: Rieth, Malte [Author] • Heidland, Tobias [Author]
Type of Resource: E-Book
Language: English
Berlin DIW Berlin, German Institute for Economic Research 2020
Series: Deutsches Institut für Wirtschaftsforschung: Discussion papers ; 1854
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Summary: Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Generally, we find, for freely floating currencies, that FX intervention shocks significantly affect exchange rates and that this impact persists for months. The signaling channel dominates the portfolio channel. Moreover, interest rates tend to fall in response to sales of the domestic currency, whereas stock prices of large (exporting) firms increase after devaluation of the domestic currency.
Physical Description: 1 Online-Ressource (circa 64 Seiten); Illustrationen