Article Journal of Emerging Market Finance 17(1) 1–36 © 2018 Institute for Financial Management and Research SAGE Publications sagepub.in/home.nav DOI: 10.1177/0972652717748088 http://journals.sagepub.com/home/emf 1 Assistant Professor, Finance and Strategy Area, T.A. Pai Management Institute, Manipal, Karnataka, India. 2 Professor of Economics, IIM Indore, Madhya Pradesh, India. Corresponding author: Ekta Sikarwar, Assistant Professor, Finance and Strategy Area, T.A. Pai Management Institute, Post Box. No. 9, Manipal 576104, Karnataka, India. E-mail: ekta@tapmi.edu.in Effect of Central Bank Intervention in Estimating Exchange Rate Exposure: Evidence from an Emerging Market Ekta Sikarwar 1 Ganesh Kumar Nidugala 2 Abstract This study examines the relationship between the value of the firm and unanticipated changes in exchange rate. Using a sample of 651 Indian firms over the period from 2001 to 2013, this study finds that unanticipated changes in exchange rates are more appropriate than actual changes to discover statistically significant and economically important exchange rate exposure. Using a vector error correction model (VECM) to generate unanticipated exchange rate changes, this study provides new evidence that the intervention by central bank has a major impact on the level of Indian firms’ exchange rate exposure. Keywords Central bank intervention, exchange rate exposure, India, emerging market, vector error correction model