Journal Article

On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates

Authors

  • Stefan Reitz
  • Jan C. Rülke
  • Mark P. Taylor
Publication Date

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.

Info

JEL Classification
C10, F31, F41