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The effectiveness of foreign exchange intervention in emerging market countries: Evidence from the Czech koruna

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  • Disyatat, Piti
  • Galati, Gabriele
Abstract
We survey the literature on the efficacy of foreign exchange market intervention in emerging market countries, emphasising the differences with the literature on industrial countries. We then use official statistics on central bank intervention by the Czech National Bank in conjunction with options market data, to study the impact of intervention during 2001-02. We find that central bank intervention had some (weakly) statistically significant impact on the spot rate and the risk reversal but that this impact was small. We do not find evidence that intervention had an influence on short-term exchange rate volatility. We also find that, in our sample period, Czech authorities appeared to intervene mainly in response to an acceleration of the speed of koruna appreciation.
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  • Disyatat, Piti & Galati, Gabriele, 2007. "The effectiveness of foreign exchange intervention in emerging market countries: Evidence from the Czech koruna," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 383-402, April.
    • Handle: RePEc:eee:jimfin:v:26:y:2007:i:3:p:383-402
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    as
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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