Inflation zone targeting and the Federal Reserve

Zone-quadratic preference, asymmetry and international reserve accretion in India: An empirical investigation

“…In fact, the RBI claims that intervention activity is not governed by a predetermined target or band around the exchange rate (see Mohan, 2008). So we indirectly estimate the RBI's implicit zone of inaction using the methodology proposed by Tachibana (2006Tachibana ( , 2008. Once we estimate the implicit zone of inaction, the coefficients of Eq.…”

“…In order to determine the width of the zone, we follow Tachibana (2006Tachibana ( , 2008. We start with a linear policy reaction function in order to facilitate comparison.…”

“…While our benchmark model can help us to formally evaluate whether the RBI has a zone of inaction or not, it cannot however tell us what the width of this zone is. We indirectly estimate the RBI's implicit zone of inaction using a methodology proposed by Tachibana (2006Tachibana ( , 2008.…”

Nonlinear Relationship based on Range Quadratic Loss Function

“…At present, studies on the relationship among the intervention preferences of the central bank, the exchange fluctuation and the foreign exchange reserves haven't been found and most of the literature applied the range intervention preference to the research on the inflation target and economic growth of the central bank [21][22][23][24]. There were intervention costs in the intervention of the central bank in the foreign exchange market, such as the intervention of foreign exchange asset conversion and sterilization in the currency market influenced the exchange rate level and the adjustment of exchange rate influenced the domestic economic operation through the overflow effect [18], there were also some political costs [19,20], so the central bank would analyze the costs and earnings when intervening in the foreign exchange market, and only when the earnings of the intervened foreign exchange market exceeded the earnings, would the central bank actively intervene in the foreign exchange market.…”

“…The intervention threshold of the central bank (namely, the target range of the central bank) is introduced to the relaxation assumption to build the intervention threshold model of the central bank and to allow different θ value, which depends on the size of different exchange rate range. Complied with the method of work of introducing a dummy variable by Minoru Tachibana [21,22], Boinet and Martiny [27]as well as Naraidoo and Raputsoane [24] , it explained the change of policies of the equation in and out of the threshold with the dummy variable.…”