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Comparative Economic Studies

, Volume 60, Issue 3, pp 442–474 | Cite as

On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia, 1999–2007

  • Biswajit Banerjee
  • Juraj Zeman
  • Ľudovít Ódor
  • William O. RiiskaJr.
Article
  • 23 Downloads

Abstract

Based on intraday high-frequency data, this paper investigates the effect of sterilized interventions on the Slovak koruna/euro exchange rate for different time windows during a period that coincides with Slovakia’s preparation for EU accession and euro adoption. Results confirm a significant relationship between intervention and exchange rate change. The maximum effect of intervention is reflected in the exchange rate change within a couple of hours, and the effect over longer time windows weakens only gradually. The initial impact of sale interventions is stronger than that of purchase interventions.

Keywords

Foreign exchange market intervention Koruna/euro exchange rate Monetary policy framework ERM II participation Slovakia 

JEL Classifications

E44 E58 F31 G15 

Notes

Acknowledgements

At the time of writing this paper, Biswajit Banerjee was Chief Economist at the Bank of Slovenia. William O. Riiska, Jr., contributed to the paper when he was at Haverford College. Comments received from five anonymous referees and the editor have contributed to substantial strengthening of the paper. The views expressed in this paper are those of the authors and do not necessarily represent the views of the institutions to which they are affiliated.

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Copyright information

© Association for Comparative Economic Studies 2017

Authors and Affiliations

  • Biswajit Banerjee
    • 1
    • 2
  • Juraj Zeman
    • 3
  • Ľudovít Ódor
    • 4
  • William O. RiiskaJr.
    • 5
  1. 1.Ministry of Finance of the Slovak RepublicBratislavaSlovak Republic
  2. 2.Department of EconomicsAshoka UniversitySonepatIndia
  3. 3.National Bank of SlovakiaBratislavaSlovak Republic
  4. 4.Council for Budget ResponsibilityBratislavaSlovak Republic
  5. 5.Hutchin Hill CapitalNew YorkUSA

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