Investigation of Central Bank Intervention in the Foreign Exchange Market from the Viewpoint of Relationship between Balance of Payment and Exchange Rate

• Main Authors: Alena Ivannikova, 亞蓮娜
• Other Authors: 江怡蒨博士
• Format: Others
• Language: en_US
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/42658258645365743677

碩士 === 逢甲大學 === 國際貿易學系 === 103 === Economists and scholars often draw their attention to the relation between the exchange rate and balance of payments (BOP) of a particular country in order to investigate the economic situation in a country and governments’ policy towards it. This study, in particular, examines the relation between BOP and exchange rate from the viewpoint of central bank intervention in the foreign exchange market. If there is no central bank intervention, BOP and exchange rate will have strong relation which can be calculated through correlation coefficient. However, there is a usual practice for central banks to have an influence on the exchange rate, which leads to low correlation coefficient figures. To conduct our research we are using the quarterly data from AREMOS Databank for the time period from 2005/07 to 2014/12. We are interested in G20 countries because they represent the biggest economic power in the world (85% of GWP, 80% of world trade, 2/3 of world population), serving as the examples for other countries. We also divide sample countries into developed and emerging markets in order to perform analysis and comparison between the BOP-exchange rate correlation coefficient, further dividing BOP into current and financial accounts. From our research, we derived that G20 countries could be divided into developed and developing, importing and exporting economies as well as economies with prevailing capital inflow or outflow. Furthermore, the figures of correlation coefficient showed us that Central Banks intervene rather much to the Forex in the most of countries, and Brazil together with Saudi Arabia are the only examples with a low Central Bank intervention among the G20 countries.