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World Scientific Studies in International Economics
In this paper, we investigate the effects of central bank interventions (CBI) in a noise trading model with chartists and fundamentalists. We first estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a fundamental value. Then, we investigate the role of central bank interventions for explaining the switching properties between the two types of agents. We find evidence that in the medium run,doi:10.1142/9789814513197_0006 fatcat:byapf2aybffztfhkc336gnwdja