Impact of Central Bank Intervention on Exchange-Rate Forecast Heterogeneity

CEPII Working Paper Series No. 02-05

45 Pages Posted: 10 Nov 2013

See all articles by Michel A. R. Beine

Michel A. R. Beine

University of Luxemburg; CESifo (Center for Economic Studies and Ifo Institute)

Agnès Bénassy-Quéré

Paris School of Economics (University Paris 1)

Estelle P. Dauchy

Campaign for Tobacco Free Kids

Ronald MacDonald

University of Strathclyde in Glasgow - Department of Economics; Government of New Zealand - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 5, 2002

Abstract

We investigate the impact of central bank intervention in the foreign exchange market on forecast heterogeneity. Market heterogeneity is based on a sample of forecasts made by a large number of commercial banks over two distinct periods for the DEM (or EUR) and the JPY against the USD. We show that, in general, forecast heterogeneity increases as a result of interventions, whether the interventions are unexpected (DEM-EUR) or expected (JPY). Our results also emphasise the role of rumours, especially in the YEN-USD market. In sum, official interventions are shown to move market opinions, albeit differently across the two markets.

Keywords: Central Bank Intervention; Foreign Exchange Markets; Survey Expectations; Market Micro-Structure

JEL Classification: F31, C42

Suggested Citation

Beine, Michel A. R. and Benassy-Quere, Agnes and Dauchy, Estelle P. and MacDonald, Ronald R., Impact of Central Bank Intervention on Exchange-Rate Forecast Heterogeneity (April 5, 2002). CEPII Working Paper Series No. 02-05. Available at SSRN: https://ssrn.com/abstract=2351380

Michel A. R. Beine

University of Luxemburg ( email )

L-1511 Luxembourg
Luxembourg

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Agnes Benassy-Quere

Paris School of Economics (University Paris 1) ( email )

106-112 boulevard de l'Hopital
Paris, F-75013
France
+33 1 44 07 82 19 (Phone)

HOME PAGE: http://www.parisschoolofeconomics.com/benassy-quere-agnes/agnesb.html

Estelle P. Dauchy (Contact Author)

Campaign for Tobacco Free Kids ( email )

1400 I Street NW
Suite 1200
Washington, DC New York 20005
United States
5857542532 (Phone)

Ronald R. MacDonald

University of Strathclyde in Glasgow - Department of Economics ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
+44 141 548 3861 (Phone)

Government of New Zealand - Department of Economics

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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