We model an impulse control problem when the controller’s action affects the state as well as the dynamics of the state process for a random amount of time. We apply our model to solve a central bank intervention problem in the foreign exchange market when the market observes and reacts to the bank’s interventions. Published by Elsevier B.V.

We address the problem of optimal Central Bank intervention in the exchange rate market when interventions create feedback in the rate dynamics. In particular, we extend the work done on optimal impulse control by Cadenillas and Zapatero (1999, 2000) to incorporate temporary market reactions to Bank interventions. We obtain new explicit optimal impulse control strategies that account for these ...

this paper evaluates the real exchange rate fluctuations and uncertainties resulting from it, in the iranian economy. for this purpose, at first indirect effect of real exchange rate uncertainties on economic growth through foreign investment, private investment and exports are expressed, then the real exchange rate uncertainties and its relationship with economic growth and final pattern of in...

This paper presents stylized facts concerning the spot intra-daily foreign exchange markets. It first describes intra-daily data and proposes a set of definitions for the variables of interest. Empirical regularities of the foreign exchange intra-daily data are then grouped under three major topics: the distribution of price changes, the process of price formation and the heterogeneous structur...

The Second World War and the reconstruction period that followed gave a great impetus to the profession of business economics. During the war, economists, although few in number, played prominent, even decisive roles in many wartime operations.2 The main centres of such activity were the small but powerful staff of the Bank of Canada; the even smaller but more powerful staff of the Department o...

Participants of an experimental foreign exchange market forecast an exchange rate with an unknown price reaction function. Aggregate demand is derived from their own forecasts and random shocks. Our experimental results indicate that the expectations of the subjects tend to be coordinated on a common prediction strategy. This strategy is best described as a trendextrapolative, destabilizing exp...

The unprecedented rise in Foreign Exchange Reserves (FER) in some of the Asian countries raises a concern about their optimal size and appropriate utilization. In India too, in recent months, different ways to utilize FER, in particular, to finance infrastructure, have been debated. The Government of India intends to use a part of its FER for infrastructure financing and has announced a scheme ...

A model of inward foreign direct investment for Australia is estimated. Foreign direct investment is found to be positively related to economic and productivity growth and negatively related to foreign portfolio investment, trade openness, the exchange rate and the foreign real interest rate. Foreign direct investment is found to be a substitute for both portfolio investment and trade in goods ...