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Central Bank Interventions in Controlling Exchange Rate: A Study of Da Afghanistan Bank Afghanistan

Mr. Shahzad Anwar, Mr. Allahjan Sherzad

Volume 1 Issue 3 | Jul 2018

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Abstract

This study examines foreign currency exchange and capital notes intervention by Da Afghanistan Bank (DAB) and its effectiveness in controlling exchange that is Afghani to US$. In order to determine the role of central bank data was collected from January 2005 to December 2017on monthly basis. Augmented Dicky Fuller (ADF) and Phillips Perron (PP) test were used to determine the level of stationarity for dependent and independent variables. All variables were found to be stationary at level zero. Thus Ordinary Least Square Method was used to estimate the parameters. The results indicate that there is impact of intervention variable on exchange rate, but the relationship is very weak, which means as the amount for intervention variable increases, it helps reduce volatility though the affect is very minimum. The exchange rate determination theory is Monetary Channel for Afghani exchange rate and the interventions by DAB are unsterilized.