On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia 1999-2007
Date
2014
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Producer
Director
Performer
Choreographer
Costume Designer
Music
Videographer
Lighting Designer
Set Designer
Crew Member
Funder
Rehearsal Director
Concert Coordinator
Advisor
Moderator
Panelist
Alternative Title
Department
Haverford College. Department of Economics
Type
Thesis
Original Format
Running Time
File Format
Place of Publication
Date Span
Copyright Date
Award
The Holland Hunter 1943 Economics Department Thesis Prize
Language
eng
Note
Table of Contents
Terms of Use
Rights Holder
Access Restrictions
Dark Archive
Terms of Use
Tripod URL
Identifier
Abstract
This paper investigates the effect of the National Bank of Slovakia's (NBS) intervention in the SKK/EUR foreign exchange market from 1999 through 2007 (the time period covering Slovakia's preparation for EU accession and euro adoption) on the level of the SKK/EUR exchange rate. The study asks 2 questions. Did the National Bank of Slovakia's sterilized interventions in the market for the koruna and the euro from 1999-2007 have an effect on the level of the koruna's exchange rate with the euro? If so, for how long did this effect last? High-frequency, intraday data on both foreign exchange rates and sterilized NBS interventions in the market for the koruna and the euro is analyzed using OLS to this end. The frequency of this data allows the author to counteract the perennial endogeneity problem of studies on central bank intervention. 3 conclusions are offered. First, NBS intervention from 1999-2007 had a statistically significant impact on the level of the SKK/EUR exchange rate in the short-term. Second, this short-term effect was statistically insignificant after 2 hours and 40 minutes had passed following each NBS intervention trade, implying the effect of intervention dissipates over-time. Third, given the short-term impact of NBS intervention, this tactic could be considered an expensive policy tool for influencing the level of a country's exchange rate, as intervention can require a central bank to draw down substantially on its foreign exchange reserves.