We are grateful to Michael Dear, Mardi Dungey, Heinz Herrmann, the editor Jeffrey Sheen, and two anonymous referees for helpful comments and suggestions. We thank Suk-Joong Kim and the Reserve Bank of Australia for kindly providing the intervention data used in this study. The views expressed here are those of the authors and are not necessarily those of the Deutsche Bundesbank or its staff.
On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates*
Article first published online: 22 MAR 2011
© 2011 The Economic Society of Australia
Volume 87, Issue 278, pages 465–479, September 2011
How to Cite
REITZ, S., RÜLKE, J. C. and TAYLOR, M. P. (2011), On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates. Economic Record, 87: 465–479. doi: 10.1111/j.1475-4932.2011.00723.x
- Issue published online: 19 AUG 2011
- Article first published online: 22 MAR 2011
This article applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate. Second, a STR-GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders’ confidence in fundamental analysis. This is in line with the so-called coordination channel of intervention effectiveness.