New Evidence on the Effectiveness of Foreign Exchange Market Intervention
Posted: 26 Feb 2008
This paper compares foreign exchange market intervention in case there is no uncertainty about the extent of an imperfectly sustainable target zone and where there is uncertainty. A well-known example of the first case was the European Monetary System between 1979 and 1992. An example of the latter is the dirty floating of the dollar against the Dmark and yen after the so-called Louvre Accord in 1987. The analysis shows that the instantaneous effectiveness of intervention tends to be larger the more implicit the band policy is. our empirical results which use Belgian and US intervention data support this claim.
Keywords: official intervention, target zones
JEL Classification: F31, F33
Suggested Citation: Suggested Citation