We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Exchange Rate Dynamics and Central Bank Interventions: On the (De)Stabilizing Nature of Targeting Long-Run Fundamentals Interventions.
- Authors
Gardini, L.; Radi, D.; Schmitt, N.; Sushko, I.; Westerhoff, F.
- Abstract
We develop a foreign exchange market model in which a market maker adjusts the exchange rate with respect to the trading behavior of chartists, fundamentalists and a central bank. While chartists bet on the persistence of bull and bear markets, fundamentalists speculate on mean reversion. The central bank seeks to stabilize the foreign exchange market by placing buy (sell) orders when the undervaluation (overvaluation) of the exchange rate exceeds a certain threshold. Since a one-dimensional piecewise-linear discontinuous map with three branches determines the evolution of the exchange rate, we use a combination of analytical and numerical tools to explore the extent to which the central bank is able to tame the behavior of the foreign exchange market.
- Subjects
FOREIGN exchange rates; CENTRAL banking industry; FOREIGN exchange market; BEAR markets; MARKET makers
- Publication
Nonlinear Dynamics, Psychology & Life Sciences, 2024, Vol 28, Issue 2, p261
- ISSN
1090-0578
- Publication type
Article