An Empirical Analysis of Central Bank Intervention Volatility and Exchange Rate Volatility : Evidence from India

This paper proposes to examine the causal relationship between central bank intervention and foreign exchange rate. The study uses weekly data for the period from 2nd April 1993 to 31st December 2010. The present study reveals feedback causal relationship between the conditional mean and conditional variance of central bank intervention and foreign exchange rate. The results imply that the exchange rate volatility is affected by the future information of exchange rate intervention