Essays on central bank foreign exchange intervention: The market microstructural approach
Abstract
This dissertation focuses on the effect of central bank intervention on the exchange rate movements. First, we propose a market microstructure model of central bank intervention. We analyze the relationship between central bank intervention and the characteristics of the foreign exchange market. The model predicts that the optimal size of central bank intervention depends on the market traders' trading behavior. Second, we test the effects of U.S. interventions on the exchange rate level and its volatility over the period of 1985–1996. We find that U.S. intervention had mixed effects on the exchange rate level but it increased exchange rate volatility in most cases.
Degree
Ph.D.
Advisors
Carlson, Purdue University.
Subject Area
Finance|Banking
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