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High Frequency Dynamics of the Exchange Rate in Chile

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Author Info
Kevin Cowan
David Rappoport
Jorge Selaive

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Abstract

We estimate a reduced form model for the daily dynamics of the nominal spot exchange rate in Chile. The model does reasonably well in explaining the long and short run dynamics for the peso-dollar exchange rate for the period 2001-2006. In addition, we extend the model to evaluate the effects of the foreign investment of pension funds, foreign exchange rate interventions by the Central Bank and other events whose effects on the exchange rate have policy implications. We find –in line with previous work conducted at the Central Bank - that the impact of Central Bank actions on the FX market seemed to be better channeled through public announcements. Moreover, we find that changes in the pension funds limits on foreign assets had significant, but small and transitory effects on the spot peso-dollar exchange rate.

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Publisher Info
Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 433.

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Date of creation: Nov 2007
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Handle: RePEc:chb:bcchwp:433

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  1. Ilan Goldfajn & Rodrigo O. ValdŽs, 1999. "The Aftermath Of Appreciations," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 229-262, February. [Downloadable!] (restricted)
  2. Matías Tapia & Andrea Tokman, 2004. "Effects of Foreign Exchange Intervention Under Public Information: the Chilean Case," Working Papers Central Bank of Chile 255, Central Bank of Chile. [Downloadable!]
  3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall. [Downloadable!] (restricted)
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  4. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Graciela L. Kaminsky & Karen K. Lewis, 1996. "Does foreign exchange intervention signal future monetary policy?," Working Papers 96-7, Federal Reserve Bank of Philadelphia.
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  6. Michael Hutchison, 2003. "Is official foreign exchange intervention effective?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Jul 18. [Downloadable!]
  7. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Carolina Gómez Restrepo & Diego Jara Pinzón & Andrés Murcia Pabón, 2006. "Impacto De Las Operaciones De Los Fondos De Pensiones Obligatorias En Los Mercados Financieros Colombianos," BORRADORES DE ECONOMIA 002806, BANCO DE LA REPÚBLICA. [Downloadable!]
  9. Shang-Jin Wei & Jungshik Kim, 1997. "The Big Players in the Foreign Exchange Market: Do They Trade on Information or Noise?," NBER Working Papers 6256, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June. [Downloadable!] (restricted)
  11. Jonathan Kearns & Roberto Rigobon, 2003. "Identifying the Efficacy of Central Bank Interventions: Evidence from Australia," RBA Research Discussion Papers rdp2003-04, Reserve Bank of Australia. [Downloadable!]
  12. Rasmus Fatum & Michael M. Hutchison, . "Is Intervention a Signal of Future Monetary Policy? Evidence from the Federal Funds Futures Market," EPRU Working Paper Series 96-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  13. Jacob A. Bikker & Pieter Jelle van der Sluis & Laura Spierdijk, 2004. "Market Impact Costs of Institutional Equity Trades," DNB Working Papers 001, Netherlands Central Bank, Research Department. [Downloadable!]
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  14. repec:rus:hseeco:181565 is not listed on IDEAS
  15. Paul A. Gompers & Andrew Metrick, 2001. "Institutional Investors And Equity Prices," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 229-259, February. [Downloadable!] (restricted)
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  16. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February. [Downloadable!] (restricted)
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  17. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," International Finance 9707001, EconWPA. [Downloadable!]
  18. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May. [Downloadable!] (restricted)
  19. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," NBER Working Papers 6174, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Chiraphol N. Chiyachantana & Pankaj K. Jain & Christine Jiang & Robert A. Wood, 2004. "International Evidence on Institutional Trading Behavior and Price Impact," Journal of Finance, American Finance Association, vol. 59(2), pages 869-898, 04. [Downloadable!] (restricted)
  21. Husted, Steven & MacDonald, Ronald, 1999. "The Asian currency crash: were badly driven fundamentals to blame?," Journal of Asian Economics, Elsevier, vol. 10(4), pages 537-550. [Downloadable!] (restricted)
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