We study variations in the risk-neutral distributions of the exchange rates in Brazil, Chile, Colombia, Mexico, and Peru due to interventions implemented by these countries. For this purpose, we first estimate the risk-neutral densities of the exchange rates based on derivatives market data, for...

The effectiveness of the foreign exchange market interventions conducted by the Deutsche Bundesbank during the Louvre period to alter either the level or the volatility of the $/DM spot rate is examined. Volatility quotes implicit in foreign currency options are employed to recover the impact of...

This paper examines how much the central bank should adjust the interest rate in response to real exchange rate fluctuations. The paper first demonstrates in a two-country Dynamic Stochastic General Equilibrium (DSGE) model, that the home bias in consumption is important to duplicate the...

In this paper we investigate the effects of central bank interventions (CBI) in a noise trading model with chartists and fundamentalists. We first estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a...

This paper attempts to identify implicit exchange-rate regimes for currencies of candidate countries vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12. Our results would suggest...

We investigate the effects of Central Bank interventions which are designed to smooth exchange rate volatility but are not aimed at a particular trend level. We present a model in which the intervention flow is a non-linear mapping of the market order flow. Simulations show that small daily...

Exchange rates in Latin America display a large volatility, constitute a central element of the policy strategies and their evolution have an important impact on financial stability due to the dollarization of liabilities which most countries exhibit. However, assessments on equilibrium exchange...

This paper presents the results of a survey of monetary authorities with respect to foreign exchange intervention. The survey offers evidence on new issues that would otherwise be difficult to investigate, such as response times, non-foreign exchange factors in intervention and profitability....

An exchange rate model with crash risk is developed with the exchange rate confined in a wide moving band. A currency crash occurs when its exchange rate breaches a boundary. Using an asymmetric mean-reverting fundamental shock to incorporate intervention policy in the model, the log-normalised...