A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates
City University London - Sir John Cass Business School
G. d'Annunzio University - Dipartimento di Economia
CEPR Discussion Paper No. 3085
We study the effects of sterilized intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transaction data between 1985-95.We extend preliminary analysis conducted by Fischer and Zurlinden (1999) by matching these data with intra-day indicative exchange ate quotes and with news-wire reports of central banks' activity. Via an event study analysis we find that intervention has important short-run effects on exchange ate returns and volatility. In particular, among various results, we find that intervention i) has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks, ii) is partially anticipated by the market and iii) temporarily reduces market liquidity.
Number of Pages in PDF File: 45
Keywords: Sterilized intervention, foreign exchange market, market microstructure
JEL Classification: F31, G14, G15working papers series
Date posted: December 18, 2001
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