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Central Bank Interventions, Communication and Interest Rate Policy in Emerging European Economies

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  • Balazs Egert

Abstract

This paper analyses the effectiveness of foreign exchange interventions in Croatia, the Czech Republic, Hungary, Romania, Slovakia and Turkey using the event study approach. Interventions are found to be effective only in the short run when they ease appreciation pressures. Central bank communication and interest rate steps considerably enhance their effectiveness. The observed effect of interventions on the exchange rate corresponds to the declared objectives of the central banks of Croatia, the Czech Republic, Hungary and perhaps also Romania, whereas this is only partially true for Slovakia and Turkey. Finally, interventions are mostly sterilized in all countries except Croatia. Interventions are not much more effective in Croatia than in the other countries studied. This suggests that unsterilized interventions do not automatically influence the exchange rate.

Suggested Citation

  • Balazs Egert, 2006. "Central Bank Interventions, Communication and Interest Rate Policy in Emerging European Economies," CESifo Working Paper Series 1869, CESifo.
    • Handle: RePEc:ces:ceswps:_1869
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    More about this item

    Keywords

    central bank intervention; foreign exchange intervention; verbal intervention; central bank communication; Central and Eastern Europe; Turkey;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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