High-Frequency Analysis of Foreign Exchange Interventions: What Do We Learn?

36 Pages Posted: 3 Dec 2008

See all articles by Lukas Menkhoff

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2008

Abstract

The high-frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run as they are regarded as information; but they can reduce volatility overall. Ways of transmission may reach beyond the signaling channel and also include the portfolio balance and a damping channel. Finally, interventions are more successful if they obey certain conditions, such as being coordinated among central banks and going with the market and fundamentals.

Keywords: foreign exchange, central bank intervention, high-frequency data, transmission channel

JEL Classification: F31, G14, G15, E44

Suggested Citation

Menkhoff, Lukas, High-Frequency Analysis of Foreign Exchange Interventions: What Do We Learn? (November 2008). CESifo Working Paper Series No. 2473. Available at SSRN: https://ssrn.com/abstract=1310086

Lukas Menkhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

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