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K.G. Sahadevan, Ph.D Associate Professor Indian Institute of Management Prabandh Nagar, Off Sitapur Road Lucknow 226 013 INDIA E-mail: devan@iiml.ac.in Phone: 0522-361889 Fax: 0522-361840
FOREIGN EXCHANGE INTERVENTION AND FUTURE MONETARY POLICY: SOME EMPIRICAL EVIDENCE ON SIGNALING HYPOTHESIS*
ABSTRACT The present study attempts to examine the following questions in the Indian context. Has foreign exchange intervention been successful in stabilizing exchange rate? Has the intervention been sterilized with the objective of maintaining monetary target? Does intervention signal changes in future monetary policy variables? The estimates of the intervention and sterilization equations indicate that the central bank sterilizes a major portion of reserve flow, and purchases US$ when its price in terms of rupee is low and vice versa. The estimates of the money supply process show that purchases (sale) of US$ are correlated with expansionary (contractionary) monetary policy in the future. However, the results from Granger test of causality indicate that intervention does not have any significant causal relationship with monetary variable and exchange rate.
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I. INTRODUCTION
The intervention of central bank in foreign exchange market and its impact on exchange rate has been the focus of theoretical and empirical research ever since the introduction of floating exchange rate system. Intervention is generally defined as the official purchases and sales of foreign currencies that the monetary authorities of a country undertake with the objective of influencing future currency movements.1 In the case of unsterilized intervention monetary authority buys (sells) foreign exchange due to which its monetary base increases (decreases) by the amount of the purchase (sale). Through sterilized intervention the central bank, on the other hand, neutralizes the effect of purchase (sale) of foreign exchange on domestic monetary base by undertaking equal amount of sale (purchase) of domestic currency denominated bonds. The completely sterilized
intervention, under a simple view, does not directly affect prices or interest rates and hence does not influence the future exchange rate.
There are however two major channels through which the sterilized interventions indirectly affect exchange rate the portfolio channel and the signaling channel. The portfolio-balance channel explores the impact of changes in relative supply of domestic (change in the quantity of publicly held government debt) and foreign assets due to the intervention operations (Dominguez and Frankel, 1993). By changing the outstanding supplies of domestic and foreign currency outside assets, the central bank may cause portfolio re-balancing that would lead to exchange rate changes. The conclusions drawn on the basis of portfolio balance theory, by and large, indicate that under sterilized intervention exchange rate remain unaffected and alter only the currency composition of domestic and foreign assets. This is due to the fact that sterilized intervention neutralizes the money-stock effect through an offsetting transaction by the central bank through open market purchase or sale of government securities or by granting more or less credit to commercial banks. However, as Obstfeld (1988) pointed out a low volume of
intervention relative to large daily turnover in the market makes the portfolio channel ineffective to influence the exchange rate.
The non-sterilized interventions, on the other hand, change the monetary aggregates and interest rates due to which exchange rates would be affected in the same way as the domestic open market operations do. The signaling hypothesis proposed by Mussa
(1981) has given a new dimension to this issue triggering voluminous research in recent times. It says that foreign exchange intervention is an effective and predictable signal of monetary policy actions. He has argued that interventions induce traders in the market to alter their expectations of future monetary policy or long-run equilibrium value of the exchange rate. When the market revises its expectations of future money supplies, it also revises its expectations of the future spot exchange rate, which in turn brings about a change in the current rate. In this theoretical setting the present paper seeks to answer the following questions empirically. Has foreign exchange intervention been successful in stabilizing exchange rate? Has the intervention been sterilized with the objective of maintaining monetary target? Does intervention signal changes in future monetary policy variables? These questions have been examined empirically in the Indian context using monthly data on Reserve Bank of Indias (RBI) foreign exchange intervention from June 1995 through May 2001.
The remainder of the paper is organized into four sections. Section II briefly reviews the literature on the effectiveness of foreign exchange intervention. Section III carries a description on the international perspective of nature and purpose of intervention. The formulation of testable hypothesis and the equations for estimation have been discussed in section IV and section V presents results of the study and discussion. Section VI concludes the findings of the study. A description on data and variables, and
There is extensive literature on the effect of foreign exchange market intervention on exchange rate and future monetary policy variables.2 However, there has been very little evidence to suggest that intervention consistently and directly affects spot exchange rates, through either monetary, or a portfolio balance transmission channel [Baillie., et al,
(2000)].3 Most of the studies in this area are in the US context and are concerned with the effect of intervention on the US$ exchange rates against Japanese Yen and German Mark. These Studies differ in the methodologies used. Three different methodologies have been utilized for empirical investigation. First, there are attempts to measure the effect of current intervention on the exchange rate over and above the contribution of the current fundamental. Secondly, the most common method has been the estimation of money supply process (equation 2 below) and measurement of the ability of intervention to predict the future course of money supply. The third approach, which has been used in Fatum and Hutchison (1999), is to directly estimate the effect of intervention on changes in expected monetary policy.
The findings of Dominguez and Frankel (1993) have supported the effect of Federal Reserve and Bundesbank intervention on exchange rate through the portfolio channel as against the consensus view thus far that the portfolio channel of intervention had been ineffective. Similarly, the findings of Ramaswamy and Samiei (2000) on the basis of a simple forward looking model of the exchange rate showed that interventions conducted during 1995-99 succeeded in changing the path of the yen-dollar rate in the desired direction. The results from probit model indicated that the Bank of Japan (BoJ) had pursued a symmetrical policy by which both an excessive appreciation and depreciation of the yen provoked interventions, and that interventions in the yen-dollar market tend to occur in clusters. In the context of UK, Kearney and MacDonald (1986) have examined the potency of sterilized intervention using a portfolio balance model the result of which indicated that sterilized intervention had been effective on British pound-US$ exchange rates.
The evidences from most of the studies are in favor of signaling channel, which reveals the monetary policy intentions of the central bank through interventions. The portfolio channel through which sterilized intervention affect exchange rates, on the other hand, has received little empirical support. Using bivariate vector autoregressions and Grangercausality tests, Lewis (1995) has examined whether intervention helps predict future changes in monetary policy in the US context. The study reports a mixed picture of the
signaling story and finds a circular relationship between intervention and future monetary policy. Kaminsky and Lewis (1996) have also reported similar results, which indicate that the US intervention provided a signal to future changes in interbank rates and monetary aggregates, but sometimes in the opposite direction of that predicted by the conventional signaling hypothesis. Ghose (1992) tested the portfolio balance channel by examining the effects of changes in relative asset supplies on the US$-Deutschemark rate and found a weak, but statistically significant, portfolio balance influence on the exchange rate. In Fatum and Hutchison (1999), the evidence obtained from GARCH model found dollar intervention not related to a rise in expected future short-term interest rates (monetary tightening). They have used the federal funds futures market prices as the proxy for market expectations on future monetary policy.
Over the past few years, attention has been shifted to studying the effect of intervention on exchange rate volatility. On the whole, the evidence from these studies on impact of intervention on conditional exchange rate volatility as well as on implied volatility is not very conclusive. Aguilar and Nydahl (2000) reported results from GARCH models that central banks sterilized intervention has not systematically reduced the volatility of Swedish kroner rates against US$ and Deutsch Mark. The evidence presented in BonserNeal (1996) on the Federal Reserves intervention suggested that the central bank intervention had little effect on volatility. Using the Friedmans profit test4 Andrew and Broadbent (1994) tested the effectiveness of the Reserve Bank of Australias (RBA) intervention and showed that RBA has made significant profits from intervention and that intervention has tended to stabilize the Australian dollar exchange rate over the period the currency has been floating. The nonavailability of data on the rate and volume of intraday sale and purchase of foreign currency undertaken by any central bank however limit the feasibility of profit test. The study has also used the Wonnacotts criterion5 the result of which supported the findings of profit test. Kim et al (2000) came out with similar evidence in the Australian context by showing that sustained and large interventions have a stabilizing influence in the Australian $-US$ market in terms of direction and volatility during 1983-97. Galati and Melick (1999) studied the impact of the Federal Reserves and BoJs intervention on the instantaneous and expected volatility (derived from option
prices) of yen-US$ exchange rates and found that the interventions did not have any impact on the forward rates but suggested that it could increase the uncertainty in the movement of spot rates. However, Baillie and Osterberg (1997) found some evidence that intervention leads to increases in volatility and also influences the risk premium in the Deutschemark-US$ and Yen-US$ forward markets. They have also reported that intervention is Granger caused by high volatility of changes in the nominal exchange rate and unidirectional from intervention to risk in the forward market. They have concluded that intervention is motivated by increases in spot rather than forward market volatility.
To conclude, there is no general consensus evidence to support the portfolio balance channel. However, there is some, but no conclusive evidence that intervention mainly works through the signaling channel, i.e., by the central bank conveying a signal to market participants about information on future fundamentals that they do not have. In a fairly comprehensive survey of research Baillie et al (2000) concluded that empirical work to date suggests that exchange market intervention does not directly affect the fundamental economic determinants of exchange rates, but allows for the possibility that intervention may sometimes influence market expectations about those fundamentals.
In its true sense, no currencies in the world are freely floated. Since the beginning of floating exchange rate system in 1973, most of the worlds major central banks have intervened frequently and at times forcefully in the foreign exchange markets to influence the path that their respective currencies have taken. Although there are no well defined rules governing the motive of intervention, the IMFs Principles for the Guidance of Members Exchange Rate Policies describes that a member should intervene in the exchange market if necessary to counter disorderly conditions which may be characterized inter alia by disruptive short-term movements in the exchange value of its currency. In the Indian context, in addition to the trade and capital controls imposed by the government, the Reserve Bank of India (RBI) uses its foreign exchange reserves for market intervention so as to align the market rate of rupee with its desired rate consistent
with certain macroeconomic parameters. This official exchange rate management has a conventional objective of ensuring the currency not deviating far away from the long-run equilibrium rate. However, other considerations like maintaining export competitiveness, guarding currency against speculation, etc., often outweigh this objective and necessitate official intervention to lean against the wind of short-term exchange rate movements.
Though the direct intervention alters the demand and supply forces in the market which, lead to correction in exchange rates in the short-term, its effectiveness however depends on the volume of intervention relative to the daily turnover in the market. The market intervention has various implications, and it is designed to fulfill certain intentions of the central bank depending on the choice between sterilized intervention and non-sterilized intervention. The sterilized intervention through open market operations offsets the
change in net foreign assets by a corresponding change in net domestic assets. This in turn helps the central bank to adhere to monetary targets. RBI at times resorts to sterilized intervention not essentially to directly affect exchange rate but to give signal in two counts. First, it signals the intention of the central bank to control the monetary growth and secondly, it signals the undesirable changes in exchange rate that are being taken place in the marketplace. These signals eventually force traders with vulnerable long or short positions to abort speculation and bring exchange rate in alignment with its long-run trend rate or to maintain the rates at a desired level. The non-sterilized
intervention, on the other hand, creates a mismatch between supply of and demand for money eventually leading to change in exchange rate in the medium term. This
intervention is effective only if its volume is sizable relative to the outstanding stock of domestic money holding. However, most studies conclude that the direct effect of intervention on exchange rates is either statistically insignificant or quantitatively unimportant [Rosenberg (1996)].6
The objectives of intervention differ by country and from one period to the other. The BoJ has consistently pursued a policy of leaning against the wind. Whenever yen raised against the dollar, the BoJ bought dollars and sold yen to moderate the yens rise; and vice versa. While BoJ intervenes in order to moderate the trends in yen over time, the
Bundesbank does intervene primarily for domestic monetary control. However, at times, Bundesbank has compromised this objective in order to get the exchange rate in alignment with its long-run rate.7 In the case of dollar however Federal Reserve has
never maintained a uniform policy for exchange rate management. While during 197880 it carried out major intervention to arrest dollars decline, the period between 1981 and 1984 witnessed benign neglect toward dollars rise. In line with the Plaza Accord dollar was encouraged to decline during 1985-86 while during 1987-92 Federal Reserve promoted greater stability of dollar in line with Louvre Accord. From 1993 onward, Federal Reserve has encouraged the dollar to decline.
Mussa (1981) has proposed that interventions are the indications to future course of monetary policy. Such signals could be particularly credible, since intervention would give the monetary authorities an open position in a foreign currency that would result in a loss if they failed to validate their signals. According to this signaling hypothesis, central bank may signal contractionary (expansionary) future monetary policy by selling (buying) the intervention currency in the foreign exchange market today. Therefore, the current sterilized intervention alters market perception about the future course of monetary policy according to which exchange rate will move even though sterilized intervention currently offsets the monetary effects. This signaling channel signifies that there is asymmetry of information between the central bank and the market participants on future fundamentals of the exchange rate.
The signaling hypothesis may be illustrated by a standard asset-pricing-model approach to exchange rates. j s = (1 ) E f t t t+ j j=0
(1)
In the above process for nominal exchange rate, st is the log exchange rate at time t, ft represents the current period fundamentals, Et is the expectations operator, and is a
discount factor. Following the monetary models of exchange rate, the current exchange rate is the expected present discounted value of differences in the relative monetary conditions which are the fundamental determinants of exchange rates.8 Given the
hypothesis that intervention at time t-k, nt-k help predict the future value of the fundamental determinant which follows a simple autoregressive process with the intervention signal entering exogenously together with a random disturbance term (t), the process of fundamental is given by f = f + n + t f t 1 tk t (2)
where f is the autoregressive coefficient of f on its own lag and is the coefficient of k period lagged intervention. The variable n being the central banks net purchase of foreign currency (US$) its coefficient would assume a positive value for the signaling story is to be right. It signifies that the purchase of foreign currency (which is equivalent to sales of domestic currency) at t-k signals an expansionary monetary policy in the future at time t. Similarly, the sale of foreign currency will be correlated with a tight monetary policy in the future. Some of the studies as explained earlier however have utilized the direct approach of estimating the following equation. E f E f = + n + t +1 t + j t t+ j 0 1 t t
(3)
The present study has mainly estimated the fundamental process (2) using broad money as the proxy for fundamental and measured the ability of intervention in terms of the estimate to forecast movements in the fundamental (expected monetary policy is being considered as the fundamental). The hypothesis is that the purchase (sales) of US$ against rupee invokes the expectation of monetary expansion (tightening).
V. EMPIRICAL TEST AND DISCUSSION OF RESULTS The table-1 and 2 contain the results of various tests. The frequency table and the 2 test indicate that intervention and exchange rates are interdependent. But the movement of exchange rate has not largely been in the direction that intervention ideally leads to. It is observed that in 48 cases out of 70 data points rupee appreciated (depreciated) when RBI was the net buyer (seller) of US$ while it moved in the expected direction in only 22 cases. Moreover, it would be interesting to note from the figure-1 that the exchange rate remained more or less stable during 1996:4 1997:10 and 1998:8 2000:4 when RBI continued to be the net buyer of US$ from the market during the former period while it was not a consistent buyer during the later period. As the figure shows, RBI has turned out to be a net buyer of US$ when rupee was sliding. For instance, between October 1998 and March 1999 rupee depreciated from 42.25/US$ to 42.43/US$ while RBI has undertaken a net purchase of dollar to the tune of Rs. 10,879 during this period. Thus the visual examination of the exchange rate and intervention data essentially indicates the fact that intervention has not been aiming at maintaining exchange rate or alternatively it has not been sufficient enough to pull the exchange rate in desired direction.
The test of central banks policy of leaning against the wind has been carried out by estimating an intervention equation. A positive coefficient for exchange rate in the intervention equation is an indication of the practice of leaning against the wind which means that central bank prevents further appreciation (depreciation) of rupee by purchase (sale) of US$. The statistically significant and negative coefficient of exchange rate (Rs./US$) in the intervention equation signifies that the central bank purchases US$ when its price in terms of Indian rupee is low and vice versa. However, the variation in monetary base found to have insignificant influence on the intervention decisions.
The figure-2 further confirms the fact that exchange rate (and intervention) does not reflect the monetary conditions. Ideally, if the transmission mechanism works, the
monetary growth and currency value should move in opposite directions i.e., positive growth in money supply should be offset by depreciation of exchange rates. The period
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of stable exchange rate between March 1993 and August 1995 has been the period of wild fluctuations in money supply growth ranging between 14 per cent to as high as 22 per cent. In spite of this, rupee remained relatively stable at around 31.50/US$ until August 1995. In September 1995, rupee closed at 34.00/US$ and subsequently remained stable at around 35.00/US$ until July 1997. A tighter monetary policy during 1995-97 has brought down the growth of money supply to around 16 per cent on an average. Further, rupee depreciated subsequently to move from 36.50/US$ to 42.50/US$ between August 1997 and June 1998, and thereafter it was stabilized. Though money supply has not grown beyond 16 per cent during this period, the fall in rupee value was on account of declining capital inflow and weak export growth.9
Following Genberg (1976), a standard sterilization equation has been estimated to see what extent the central bank sterilizes reserve flows. The estimated coefficient values of foreign currency reserves (sterilization coefficient) and central banks net credit to government in the sterilization equation capture the thrust of monetary policy to sterilize the impact of reserve flows on monetary base. Under complete sterilization, the
coefficient of reserves would be 1 and in the absence of sterilization its value would be zero. However, the estimated sterilization coefficient is 0.23, which signifies that RBI sterilizes a major portion of reserve flow. There is some supporting evidence to the signaling hypothesis as well. The test of signaling hypothesis is based on the estimates of the equation (2) in which money supply is being used as a proxy for the fundamental factor ft. The positive coefficient of lagged intervention signifies that purchases of US$ are correlated with expansionary monetary policy. A very low coefficient value of
lagged intervention in the estimated equation indicates that it has only a marginal impact on money supply. The direct approach of testing signaling hypothesis using equation (3) has also not provided substantive evidence to confirm that intervention signals future monetary conditions.
The results from test of causality indicate that intervention does not have any significant causal relationship with monetary variable and exchange rate. However, the result shows that, as expected, intervention causes changes in the level of foreign currency reserves.
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This gives an indication to the fact that RBI has not been buying (selling) dollars when rupee becomes stronger (weaker) and reserve level rises (falls).
VI. Conclusion
The present study has attempted to empirically examine the impact of central banks intervention on exchange rate and future monetary policy in the Indian context. It is emerged from the analysis that the intervention did not have stabilizing effect on exchange rate. On the contrary, the result showed that the central bank accumulates foreign currency when it is cheaper and offloads when it is dearer in terms of domestic currency. The central bank however has used intervention, though not very significantly, for signaling future course of monetary policy. To conclude, any study in the above
directions would ideally use the daily exchange rate and intervention data. The monthly data as has been utilized by the present study owing to the non-availability of daily intervention data limited the results of the study to certain extent.
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Table-1: 2 Test and Estimated Regression Equations 2 Test Number of months that Rs./US$ rate Appreciated when RBI is net buyer of US$ Depreciated when RBI is net buyer of US$ Appreciated when RBI is net seller of US$ Depreciated when RBI is net seller of US$ Total Chi-square Estimated Regression Equations Intervention equation nt = + 1 st + 2 bt + t 0.14 -4.42 1.76
(0.44) (-2.01)** (1.23)
23 22 0 25 70 19.1*
R2 = 0.21
SEE = 0.29
D-W = 2.01
= -0.36
(-3.04)
R2 = 0.31
SEE = 0.02
D-W = 2.20
R2 = 0.05
R2 = 0.05
Refer appendix for definition of variables and their notations. D-W is the Durbin-Watson statistic and values in parentheses indicate t-statistic. One, two and three asterisks indicate significance at 1%, 5% and 10% levels respectively. is the first order autoregressive parameter.
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mt nt
P-value for nt causes mt: 0.18, F-statistic F(2, 64) = 1.77 P-value for mt causes nt: 0.82, F-statistic F(2, 64) = 0.196
rt nt
P-value for nt causes rt: 0.003, F-statistic F(2, 64) = 6.53 P-value for rt causes nt: 0.024, F-statistic F(2, 64) = 3.94
st nt
P-value for nt causes st: 0.49, F-statistic F(2, 64) = 0.732 P-value for st causes nt: 0.899, F-statistic F(2, 64) = 0.106
The values in parentheses indicate t-statistic.
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2500
-7500
1995 6 1995 8 1995 10 1995 12 1996 2 1996 4 1996 6 1996 8 1996 10 1996 12 1997 2 1997 4 1997 6 1997 8 1997 10 1997 12 1998 2 1998 4 1998 6 1998 8 1998 10 1998 12 1999 2 1999 4 1999 6 1999 8 1999 10 1999 12 2000 2 2000 4 2000 6 2000 8 2000 10 2000 12 2001 2 2001 4
15
0 5 10
15
20
25
30
35
40
45
50
Rs/US$ Rates
10 1995 6 1995 9 1995 12 1996 3 1996 6 1996 9 1996 12 1997 3 1997 6 1997 9 1997 12 1998 3 1998 6 1998 9 1998 12 1999 3 1999 6 1999 9 1999 12 2000 3 2000 6 2000 9 2000 12 2001 3 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 M3 growth Rs/US$ rates 15 20 25 30 35 40 45 50
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M3 growth rates
ENDNOTES 1. In the Indian context, Reserve Bank of India uses US$ as the intervention currency which is being bought and sold against Indian rupee in the market. 2. There are also studies, e.g., Neely (2000) which deal with mechanics, timing, instruments and purpose of secrecy of intervention which are not being reviewed here. 3. This study is the most recent one to offer a fairly comprehensive survey of research in the area of central bank intervention. 4. Friedman in his seminal work on flexible exchange rate system has argued that a central bank which was stabilizing the exchange rate would tend to buy foreign exchange when its price was low, and sell when its price was high, and hence its operations would be profitable. Taking the cue from this intervention rule it is argued that the existence of profits over long periods provides a strong case for the view that central bank intervention has been effective in stabilizing the exchange rate. 5. The test proposed by Wonnacott (1982) indicates that intervention is stabilizing if it reduces the variance of exchange rate around its trend. It involves measuring whether the direction of intervention is consistent with pushing the exchange rate back towards its long-run moving average. 6. Against the consensus view in the early 1980s that central bank intervention is ineffective, Dominguez and Frankel (1993) in their seminal study argue that when the authorities are prepared to intervene at a particular upper or lower limit they will achieve a higher degree of success in stabilizing the currency with a smaller amount of intervention if they publicly announce these limits ahead of time. In the light of these findings, the Committee on Capital Account Convertibility in India headed by Shri. S.S. Tarapore recommended that a REER-monitoring band be declared to enable the participants to anchor expectations on when RBI would intervene and when it would not for making its intervention more effective [Tarapore (1997)]. 7. After the formal unification of Europe, Bundesbank implements exchange rate policy and conducts foreign exchange operations consistent with the provisions of Article 109 of the Treaty of European Union.
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8. In the formulation of ft, it is assumed that the growth of money supply in rest of the world was constant. Therefore, ft represented the change in money supply conditions in the domestic economy alone. 9. The impact of monetary policy on the behavior of rupee exchange rate and international reserves in the Indian context has been empirically examined in Sahadevan (1999) using Girton-Roper model of exchange market pressure.
The present study has been carried out on monthly data for a period starting from June 1995 through May 2001. The choice of starting period of the sample coincides with the availability of data on RBIs intervention. The variables used in the study are defined as follows: reserve money (b), broad money (m) i.e. M1 plus time deposit liabilities of banks, foreign exchange reserves (r) is the rupee value of foreign currency assets with RBI, exchange rate (s) is the monthly average rate of the rupee vis--vis US$ which is measured in rupees per unit of US$, and central banks net credit to government (g) is the central governments net borrowings from RBI. The intervention variable (n) is the rupee equivalent of monthly net purchase (positive values)/net sales (negative values) of US$ by the Reserve Bank of India in the spot and forward segments. The sources of data are RBI Bulletin and RBI Handbook of Statistics on Indian Economy.
The ordinary least square (OLS) method is used for estimating the equations specified in section IV. The possibility of serial correlation problem has been verified by using Durbin-Watson test statistics the values of which are reported against all estimated equations. In those cases where serial correlation is detected, the coefficient estimates are adjusted by using Cochrane-Orcutt method and the first order autoregressive parameter () is reported along with its t-statistics. The causality between intervention, monetary variable and foreign exchange reserves has been tested using Granger test which is based on a simple logic that a variable Y is caused by X if Y can be predicted better from past values of Y and X than from past values of Y alone.
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LITERATURE CITED Aguilar, Javiera and Stefan Nydahl., Central bank intervention and exchange rates: the case of Sweden, Journal of International Financial Markets, Institutions and Money, Vol. 10, 2000, pp.303-322. Andrew, Robert and John Broadbent., Reserve Bank operations in the foreign exchange market: effectiveness and profitability, Research Discussion Paper 9406, International Department, Reserve Bank of Australia, November 1994. Baillie, Richard T and William P. Osterberg; Central bank intervention and risk in the forward market, Journal of International Economics, Vol.43, 1997, pp.483-497. Baillie, Richard T, Owen F. Humpage and William P. Osterberg; Intervention from an information perspective, Journal of International Financial Markets, Institutions and Money, Vol. 10, 2000, pp.407-421. Bonser-Neal, Catherine., Does central bank intervention stabilize foreign exchange rates?, Federal Reserve Bank of Kansas City Economic Review, first quarter 1996, pp.43-57. Dominguez, Kathryn M and J.A. Frankel., Does foreign exchange intervention work?, Institute for International Economics, Washington D.C, 1993. Dominguez, Kathryn M and J.A. Frankel., Does foreign exchange intervention matter? The portfolio effect, American Economic Review, Vol 83(5), 1993, pp.1356-1369. Fatum, Rasmus and Michael Hutchison., Is intervention a signal of future monetary policy? Evidence from the federal fund futures market, Journal of Money, Credit, and Banking, Vol. 31 (1), February 1999, pp.54-69. Galati, Gabriele and William Melick., Perceived central bank intervention and market expectations: An empirical study of the yen/dollar exchange rate, 1993-96, Working Paper No. 77, Bank for International Settlements, October 1999. Genberg, H.A., Aspects of the monetary approach to the balance of payments theory: An empricial study of Sweden, in Frenkel and Johnson (eds), The Monetary Approach to the Balance of Payments, Allen and Unwin, London, 1976. Ghosh, Atish R., Is it signaling? Exchange rate intervention and the dollarDeutschemark rate, Journal of International Economics, Vol. 32, 1992, pp. 201-220. Kaminsky, G and Lewis, K.K., Does foreign exchange intervention signal future monetary policy, Journal of Monetary Economics, Vol. 37, 1996, pp. 285-312.
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Kearney, Colm and R. MacDonald., Intervention and sterilization under floating exchange rates The UK 1973-1983, European Economic Review, Vol.30, 1986, pp.345-364. Kim, Suk-Joong, Tro Kortian and Jeffrey Sheen., Central bank intervention and exchange rate volatility Australian evidence, Journal of International Financial Markets, Institutions and Money, Vol.10, 2000, pp.381-405. Lewis, Karen K; Are foreign exchange intervention and monetary policy related, and does it really matter?, Journal of Business, vol. 68 2), 1995, pp.185-214. Mussa, M.L., The role of official intervention, in Melaned, L. (Ed.), The Merits of Flexible Exchange Rates: An Anthology, George Mason University Press, Fairfax, VA, 1981 Neely, Christopher J., The practice of central bank intervention: Looking under the hood, The Federal Reserve Bank of St. Louis Working Paper 2000-028, October 2000. Obstfeld, M., The effectiveness of foreign exchange intervention: Recent Experience, NBER Working Paper no. 2796, December 1988. Ramaswamy, Ramana and Hossein Samiei., The yen-dollar rate: Have interventions mattered?, Working Paper No. WP/00/95 International Monetary Fund, June 2000. Rosenberg, Michael R., Central bank intervention and the determination of exchange rates, in Currency Forecasting: A Guide to Fundamental and Technical Models of Exchange Rate Determination, McGraw-Hill, New York, 1996. Sahadevan, K.G., Foreign exchange market intervention and neutralization: The Indian experience under controlled floating of rupee, Journal of Foreign Exchange and International Finance, Vol. XIII (3), Oct-Dec. 1999, pp. 181-199. Tarapore, S.S., Exchange rate policy reforms: Recent initiatives, Vikalpa, Vol. 23(1), Jan-March 1998. Wonnacott, P., US intervention in the exchange market for the DM, 1977-80, Princeton Studies in International Finance, No.51, Princeton University, 1982. *
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