Journal of Applied Finance & Banking

An Evidence for Ineffectiveness of Central Bank Foreign Exchange Interventions from Turkey

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• Abstract

  This study examines the effects of the Central Bank of the Republic of Turkey’s foreign exchange interventions via auctions on the level and volatility of the Turkish lira/US dollar exchange rate between February 02, 2009 and January 31, 2014 with daily data. In order to study the impact of interventions on the Turkish lira, this study employs the Exponential GARCH (1,1) framework. The results suggest that interventions have no significant impact on the level of the exchange rate, ever so leading the Turkish lira to appreciate. Regarding volatility, the presence of the Central Bank in the market alone is not statistically significant, however, intervention volume has a weak significant impact on the exchange rate volatility in negative direction, although still the magnitude of impact is indifferent from zero. Also, the leverage effect is found insignificant, may be referring to non–active central bank intervention in the market during the period.