Effectiveness Analysis of Foreign Exchange Intervention by China’s Central Bank Based on GARCH Model

Qiumin LI, Qian QIAN

Abstract


This paper examines the effects of the Bank of China’s intervention on CHY/USD exchange rate volatility by GARCH Model. The empirical results show that the component GARCH models provide new evidence on the effects of the Bank of China’s intervention on the volatility of the CHY/USD exchange rate. The intervention reduces the volatility component from 2008 to 2017. Using the GARCH model to simulate the pattern of rapid appreciation, the pattern of financial crisis, the pattern of devaluation of the RMB, the models are well fitted the trends of exchange rate volatility.

Keywords


Foreign exchange intervention; GARCH model; Exchange rate volatility; Scenario simulation; China’s Central Bank

Full Text:

PDF

References


Chen, L. N., & Huang, X. (2004). Empirical assessment on the effectiveness of joint intervention in the foreign exchange market. Economic Research Journal, (5), 58-66.

Diao, F. (2002). Empirical study on the effectiveness of China’s foreign exchange intervention through portfolio channels. Nankai Economic Studies, 3, 31-35.

Gan, X. D., Yang, J. M., & Zhang, J. (2007). A event study of the effectiveness about China’s central bank’s foreign exchange intervention. Journal of Financial Research, 327(9), 82-89.

Gui, Y. P. (2008). Cointegration analysis of the effectiveness of China’s foreign exchange intervention: A portfolio balance channel. The Journal of World Economy, (1), 13-22.

Hillebrand, E., Schnabl, G., & Ulu, Y. (2009). Japanese foreign exchange intervention and the yen-to-dollar exchange rate: A simultaneous equations approach using realized volatility. Journal of International Financial Markets, Institutions and Money, 19(3), 490-505.

Jun, J. (2008). Friction model and foreign exchange market intervention. International Review of Economics and Finance, 17(3), 477-489.

Fratzscher, M. (2005). How successful are exchange rate communication and interventions? Evidence from time-series and event-study approaches. Social Science Electronic Publishing.

Qin, F. M., & Bian, Y. X. (2013). Monetary policy shocks, foreign exchange intervention and exchange rate movement. Economic Theory and Business Management, (3), 64-76.

Suardi, S. (2008). Central bank intervention, threshold effects and asymmetric volatility: Evidence from the Japanese yen-US dollar foreign exchange market. Economic Modeling, 25(4), 628-642.

Suykena, J. A. K., Vandewalle, J. (1999). Least squares support vector machine classifiers. Neural Process. Lett, 9(3), 293-300.

Toshiaki, W., & Kimie, H. (2006). Effects of the Bank of Japan’s intervention on yen/dollar exchange rate volatility. Journal of the Japanese and international Economies, (20), 99-111.

Wang, X. (2013). Study on the event analysis of effectiveness of foreign exchange intervention of China’s central bank. East China Economic Management, (5), 77-81.




DOI: http://dx.doi.org/10.3968/9751

Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 qiumin li

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Share us to:   

Reminder

  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.


We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:
[email protected]; [email protected]; [email protected]

 Articles published in Management Science and Engineering are licensed under Creative Commons Attribution 4.0 (CC-BY).

 MANAGEMENT SCIENCE AND ENGINEERING Editorial Office

Address:1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.

Telephone: 1-514-558 6138
Http://www.cscanada.net Http://www.cscanada.org

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures