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Central bank intervention and overnight uncovered interest rate parity

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  • Richard T. Baillie
  • William P. Osterberg

Abstract

This paper considers the impact of U.S. and German central bank intervention on the risk premium in forward foreign exchange markets.

Suggested Citation

  • Richard T. Baillie & William P. Osterberg, 1998. "Central bank intervention and overnight uncovered interest rate parity," Working Papers (Old Series) 9823, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:9823
    DOI: 10.26509/frbc-wp-199823
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    References listed on IDEAS

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    1. Hodrick, Robert J., 1989. "Risk, uncertainty, and exchange rates," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 433-459, May.
    2. McFarland, James W & Pettit, R Richardson & Sung, Sam K, 1982. "The Distribution of Foreign Exchange Price Changes: Trading Day Effects and Risk Measurement," Journal of Finance, American Finance Association, vol. 37(3), pages 693-715, June.
    3. Humpage, Owen F. & Osterberg, William P., 1992. "Intervention and the foreign exchange risk premium: An empirical investigation of daily effects," Global Finance Journal, Elsevier, vol. 3(1), pages 23-50.
    4. Kaminsky, Graciela L. & Lewis, Karen K., 1996. "Does foreign exchange intervention signal future monetary policy?," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 285-312, April.
    5. Dominguez, Kathryn Mary, 1990. "Market responses to coordinated central bank intervention," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 121-163, January.
    6. William P. Osterberg, 1989. "Intervention and the risk premium in foreign exchange rates," Working Papers (Old Series) 8908, Federal Reserve Bank of Cleveland.
    7. Bekaert, Geert & Hodrick, Robert J., 1993. "On biases in the measurement of foreign exchange risk premiums," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 115-138, April.
    8. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 74(1), pages 3-30, September.
    9. Ding, Zhuanxin & Granger, Clive W. J., 1996. "Modeling volatility persistence of speculative returns: A new approach," Journal of Econometrics, Elsevier, vol. 73(1), pages 185-215, July.
    10. Owen F. Humpage, 1997. "Recent U.S. intervention: is less more?," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 2-10.
    11. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-1369, December.
    12. Owen F. Humpage, 1988. "Intervention and the dollar's decline," Economic Review, Federal Reserve Bank of Cleveland, vol. 24(Q II), pages 2-16.
    13. Michael W. Klein & Eric Rosengren, 1991. "Foreign exchange intervention as a signal of monetary policy," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-50.
    14. Baillie, Richard T. & P. Osterberg, William, 1997. "Central bank intervention and risk in the forward market," Journal of International Economics, Elsevier, vol. 43(3-4), pages 483-497, November.
    15. Kathryn M. Dominguez, 1993. "Does Central Bank Intervention Increase the Volatility of Foreign Exchange Rates?," NBER Working Papers 4532, National Bureau of Economic Research, Inc.
    16. Domowitz, Ian & Hakkio, Craig S., 1985. "Conditional variance and the risk premium in the foreign exchange market," Journal of International Economics, Elsevier, vol. 19(1-2), pages 47-66, August.
    17. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
    18. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
    19. Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 179-192, Summer.
    20. Geert J. Almekinders, 1995. "Foreign Exchange Intervention," Books, Edward Elgar Publishing, number 71.
    21. Klein, Michael W., 1992. "Big effects of small interventions: The informational role of intervention in exchange rate policy," European Economic Review, Elsevier, vol. 36(4), pages 915-924, May.
    22. Levine, Ross, 1989. "The pricing of forward exchange rates," Journal of International Money and Finance, Elsevier, vol. 8(2), pages 163-179, June.
    23. Hsieh, David A, 1989. "Modeling Heteroscedasticity in Daily Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 307-317, July.
    24. Maurice Obstfeld, 1988. "The Effectiveness of Foreign-Exchange Intervention: Recent Experience," NBER Working Papers 2796, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Alex Luiz Ferreira, 2004. "Leaning Against the Parity," Studies in Economics 0413, School of Economics, University of Kent.
    2. Beine, Michel & Benassy-Quere, Agnes & Lecourt, Christelle, 2002. "Central bank intervention and foreign exchange rates: new evidence from FIGARCH estimations," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 115-144, February.
    3. Michel Beine & Agnès Bénassy-Quéré & Christelle Lecourt, 1999. "The Impact of Foreign Exchange Interventions: New Evidence from FIGARCH Estimations," Working Papers 1999-14, CEPII research center.

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