عوامل مداخله ارز خارجی توسط بانک های مرکزی : شواهد از استرالیا

Intervention by the Reserve Bank of Australia on foreign exchange markets from 1983 to 1997 is conjectured to have been determined by exchange rate trend correction, exchange rate volatility smoothing, the US and Australian overnight interest rate differentials, profitability and foreign currency reserve inventory considerations. Using Probit and friction models, we show that these factors were significant influences on intervention behavior. Consistent with the constraint of intervening only when a clear trend is apparent, we find that above average measures of deviations from trend and of volatility muted the response of the Reserve Bank.

Central banks intervene frequently in foreign exchange markets, even if they have not adopted explicitly some form of an exchange rate target regime. However, there are often long stretches of time when central banks withdraw from the market, and this can occur when markets are very orderly or even in periods when there has been considerable turbulence. In this paper, our aim is to unravel some of the factors that lead to central bank involvement and withdrawal. We test five primary determinants of the behavior of a central bank (in particular, the Reserve Bank of Australia)—daily deviations from a representative trend of the spot exchange rate, the conditional volatility of daily changes in the spot rate, the differentials between the US and Australian overnight interest rates, a measure of the conditional profitability of past interventions, and foreign currency reserve inventory considerations. With regard to the first two, we conjecture that the response of a central bank is non-linear. That is, for sufficiently large disorderliness of the foreign exchange market, the central bank might back off from its normal intervention strategy. This may be because there is a very large probability that intervention will be ineffective at best, and at worst the bank may incur big and pointless losses. However, in normal times, we might expect the bank to intervene to bring the exchange rate closer to a perceived trend, and to reduce any upsurge in volatility. When the overnight foreign interest rate rises more than the domestic one, a rational overshooting weakening of the domestic exchange rate may be expected to kindle bandwagon effects, which might prompt a defense of the currency. From an operational view, central banks need to take profitability and inventory factors into consideration. One way of modeling these factors is as constraints on the objective function of the central bank. These constraints will not bind at various times, and in such circumstances, an inventory or profitability measure should not have a significant effect on intervention behavior. However, there are likely to be periods when either or both of these constraints does bind, and therefore will have an important effect on the intervention response. Our introduction of profitability and inventory factors is a novel feature of this paper. With many central banks now willing to release data1 on their daily net market purchases of foreign currency assets undertaken for intervention purposes, important research can be conducted to evaluate the effectiveness and the determinants of this intervention behavior. A substantial literature has built up to conduct this evaluation.2 In this paper, we apply many (and extend some) of the ideas in this literature by using daily intervention data released by the Reserve Bank of Australia. This application is of general interest for a number of reasons: first, the RBA participates in an official arrangement with Pacific-Basin nations (including USA and Japan) and can access loans and support from associated central banks; secondly, the RBA has published its views on its intervention strategies and so it is of interest to see whether the data reflects its statements; thirdly, though Australia is a small economy, its currency is the ninth largest traded in the world (A$70 b per day), reflecting its perceived importance as a commodity-based currency; and fourthly, the size and higher frequency of active intervention in the sample, relative to that of the Fed and Bundesbank, provides many more observations for testing the hypotheses. If central banks intervene, it must be true that they believe these actions are effective. However, the evidence on the effectiveness of intervention is mixed. In general, the evolving view is disposed towards ineffectiveness—for example, Baillie and Osterberg (1997, p. 909) conclude “there is little support for the hypothesis that intervention can consistently influence the exchange rate”. They find occasional evidence of effective ‘leaning against the wind’, but invariably detect counterproductive effects on volatility. There is a fundamental simultaneity difficulty that has to be confronted in this area. The central bank is judged to be effective in the sense of stabilizing the foreign exchange market if its intervention can be seen to return the exchange rate towards an underlying trend, or to reduce the conditional volatility of that rate and the associated trading turmoil. However, it only intervenes when the trend deviations and the volatility are noticeable. Thus basic regressions will indicate a positive correlation between these and the interventions, leading to an erroneous conclusion that the intervention was counterproductive. As a first step in dealing with this, Kim et al. (2000) introduce dummy variables to pick up sustained intervention effects and above-average size effects, and conclude that there is evidence to suggest that the Reserve Bank of Australia’s intervention behavior stabilized to some degree the conditional mean and volatility of exchange rate changes. With regard to the determinants, there is considerable evidence from countries other than Australia showing that central banks do respond to deviations of the spot rate from some target level (by leaning against the wind) and to exchange rate volatility (or market calming). Almekinders and Eijffinger (1994) construct a Tobit model for intervention by the US Federal Reserve and the Bundesbank and show that target deviations mattered. In another paper, Almekinders and Eijffinger (1996) estimate a friction model, and find evidence of leaning against the wind and of market calming. Dominguez and Frankel (1993) show that the Fed has responded to deviations from a purchasing power parity target and to targets that were announced at the Plaza and various Louvre accords from 1985 to 1990. Dominguez (1998) models the likelihood of Dollar–Mark and Dollar–Yen interventions by the G-3 countries by estimating Probit models, and reports no significant intervention response to deviations of the current level and volatility of exchange rate movements from their moving averages. Baillie and Osterberg (1997) model the probability of intervention by the Fed and the Bundesbank, and find that a GARCH measure of the deviations of conditional from unconditional volatility has no effect on interventions in the DM/US$ (though volatility in the Yen/US$ markets did encourage US$ purchases by the two central banks). However, deviations of the spot rates from the accord targets did matter. Although there is an extensive literature on the profitability of intervention,3 to our knowledge, no one has tested to see whether profitability of a central bank’s intervention activity has a potentially constraining effect on its behavior. The same goes for the testing of inventory considerations. Lewis (1995) has tested whether interest rate differentials determine intervention.4 Using VAR modeling with daily data, she shows that interest rate differentials (between the US and Japan and Germany) do appear to predict the Fed’s intervention; however, when she introduces a logistic model to cope with the effects of the high frequency of inactive days, the interest rate effects disappear. Using a different method—the friction model (described subsequently)—we re-examine this hypothesis that Lewis had to reject. In Section 2, we present an analysis of the key features of the Reserve Bank of Australia’s (RBA) foreign intervention from December 1983 to December 1997. Section 3 presents our approach to modeling the behavior of the Reserve Bank. We show that how we have obtained measures of trend deviations, conditional volatility, interest differentials, profitability and inventory. In Section 4, we discuss our econometric approaches to estimating the effects of these explanatory variables on intervention. It is important to appreciate that intervention is not a continuous process. Typically there will be minimum sizes of daily positive or negative interventions, and there are many days of inactivity. To deal with these issues, we use two of the approaches from the previous literature, as mentioned previously—Probit and friction modeling. The first assumes an asymmetry of determinants of positive and negative interventions, and is useful as a simple analysis of our five determinants for each. The friction model is an elegant method for recognizing that there may be three zones (zero, positive and negative) of the likelihood function for intervention. We contribute to the literature by extending these methodologies to investigate the empirical significance of additional constraints on intervention. Our results are given in Section 5, and some concluding comments offered in Section 6.

The aim of this paper has been to assess the importance of the various determinants of the RBA’s foreign exchange market interventions. We have conjectured that the RBA’s intervention decisions were influenced by current exchange rate movements about a trend, the level of volatility, and interest rate differentials between the US and Australian rates, and were conditioned by the profitability of past interventions and inventory considerations. The empirical evidence suggests that RBA’s interventions since the float of the A$ in 1983 have been significantly influenced by these five factors. In general, it has been found that a moderate appreciation (depreciation) of the A$ from its 150 day average leads to an intervention purchase (sale) of foreign currency designed to slow the rise (fall) of the value of the A$. This is in accordance with the stated short horizon aim of leaning against the wind. In addition, it intervened to calm the market whenever there were moderate surges in exchange rate volatility. Most importantly, we find that the RBA has responded to market disorderliness only when it is at a manageable level. The RBA apparently smoothed the market’s disorderliness by intervening whenever there was a rise that it perceived it could successfully reverse, and refrained from possibly futile intervention on days with excessive one-way speculation or highly volatile exchange rate movements. This provides empirical support for the RBA’s stated claim that it aimed to reduce only the residual volatility in the market once the market had sufficiently calmed down to reveal its clear trend. Evidence was also found that the RBA did respond to interest rate differentials, possibly to mute excessively overshooting exchange rates over the medium-term, and appeared to have paid attention to the profitability level of its past intervention activities. However, it also appears that this attention did not necessarily make these activities profitable (which ought not to be the objective); our interpretation is simply that profitability was at times a binding constraint on the behavior of the Reserve Bank. Finally, there is mixed evidence of the presence of an inventory motive, but the available data are not sufficient for a robust test.