Bank of Israel Governor Stanley Fischer
Photo: Assaf Shilo, Israel Sun
'Bank of Israel intervention strengthened dollar'
New report compiled by central bank's research department analyzes impact of involvement in foreign currency market on exchange rates
A change in the Bank of Israel's policy in the foreign currency market in March 2008, July 2008 and August 2009 resulted in devaluation in exchange rates, Calcalist reported Sunday.
An analysis of the effect that the Bank of Israel purchase of dollars had was conducted by comparing the projected exchange rate derived from the economic-statistical model and the actual exchange rate during the period of the bank's intervention.
According to a report by Avihay Sorezcky of the central bank's research department, which analyzed the effect of the intervention in the foreign currency market on the nominal shekel/dollar exchange rate, the most prominent impact on the exchange rate occurred in August 2008, after the bank increased its involvement in the foreign currency market.
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Prior to conducting the comparison, the quality of the economic-statistical model's projection capability was analyzed and was found to be good (given the actual values of the exogenous variables in the model).
The study also found that the strongest impact on the exchange rate occurred after July 2008, when the level of purchasing increased and the exchange rate's actual deviation from its projected value was upwards of ten percent.
At the end of 2008, the Bank of Israel's influence on the exchange rate began to decline, and during the first half of 2009 the gap between the actual exchange rate and its expected level closed, without the central bank's intervention.
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