Journal Article
On the Nonlinear Influence of Reserve Bank of Australia Interventions on Exchange Rates
The Economic Record
Authors
Publication Date
JEL Classification
C10
F31
F41
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.
