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On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates *
Author(s) -
REITZ STEFAN,
RÜLKE JAN C.,
TAYLOR MARK P.
Publication year - 2011
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2011.00723.x
Subject(s) - exchange rate , economics , liberian dollar , psychological intervention , mean reversion , autoregressive conditional heteroskedasticity , intervention (counseling) , econometrics , nonlinear system , foreign exchange reserves , monetary economics , finance , volatility (finance) , psychology , physics , quantum mechanics , psychiatry
This article applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate. Second, a STR‐GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders’ confidence in fundamental analysis. This is in line with the so‐called coordination channel of intervention effectiveness.