## Foreign Exchange Intervention and the Australian Dollar: Has it Mattered?

_IMF Working Papers, May 1, 2003_

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## Bibliographic details
- Authors: Hong Liang, Paul Cashin, Hali J Edison
- Published: May 1, 2003
- Series: IMF Working Papers

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### Overview and scope
- Authors: Hong Liang, Paul Cashin, Hali J Edison
- Publication date: May 1, 2003
- Data period analyzed: January 1984 to December 2001
- Context: Australian dollar floated in December 1983; Reserve Bank of Australia (RBA) has actively intervened in the foreign exchange market since then.
- Methods summarized: event study to evaluate direct effect on exchange rate level; volatility analysis using GARCH modeling and first-differenced exchange rate series.

### Key findings on exchange rate level
- Over the period 1997-2001, the RBA "has had some success in its intervention operations, by moderating the depreciating tendency of the Australian dollar."
- Overall effect of RBA intervention on the level of the Australian dollar exchange rate: "quite modest."

### Key findings on exchange rate volatility
- Intervention operations tend to be associated with an increase in exchange rate volatility.
- Interpretation: official intervention "may have added to market uncertainty."
- Overall effect of RBA intervention on volatility: "quite modest."

### Methods and evidence
- Data: daily exchange rate and official intervention data from January 1984 to December 2001.
- Analytical approaches:
  - Event study to measure direct, short-run effects of intervention on the exchange rate level.
  - GARCH model and volatility analysis to assess the effects of intervention policies on exchange rate volatility over the floating rate period.
- Exchange rate series: use of first-differenced exchange rate series is noted among keywords.

### Subjects and thematic keywords
- Subjects: Currencies, Currency markets, Exchange rate adjustments, Exchange rates, Financial markets, Foreign exchange, Foreign exchange intervention, Money
- Keywords: capturing RBA, central bank intervention, Currencies, Currency markets, exchange rate, Exchange rate adjustments, exchange rate data, exchange rate movement, exchange rate volatility, Exchange rates, first-differenced exchange rate series, Foreign exchange intervention, GARCH model, GARCH modeling, intervention episode, RBA intervention, RBA's intervention action, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/foreign-exchange-intervention-and-the-australian-dollar-has-it-mattered-16515_