The frequency and severity of financial and currency crises in emerging market economies since the mid-1990s have increasingly eroded confidence in the well-functioning of international capital markets. Cross-border currency transactions recorded a spectacular growth, reaching US$ 1500 billion...

Intervention by the Reserve Bank of Australia on foreign exchange markets from 1993 to 1997 is conjectured to have been determined by exchange rate trend correction, exchange rate volatility smoothing and profitability considerations. Using Probit and friction models, we show that these factors...