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Working Paper

Daily Bundesbank and Federal Reserve intervention and the conditional variance tale in DM/$-returns


Abstract: This paper reports on the results of an empirical investigation into the objectives of daily foreign exchange market intervention by the Deutsche Bundesbank and the Federal Reserve System in the U.S. dollar-deutsche mark market. Tobit analysis is implemented to estimate the intervention reaction functions consistently. It is found that an increase in the conditional variance in daily exchange rate returns derived from a GARCH model estimated in the paper, led the Bundesbank and the Federal Reserve to increase the volume of intervention, both in case of dollar-sales and purchases on account of their leaning against the wind policy.

Keywords: Foreign exchange - Law and legislation; Germany;

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File(s): File format is application/pdf http://www.federalreserve.gov/pubs/ifdp/1992/438/ifdp438.pdf

Authors

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1992

Number: 438