The Rise and Fall of Foreign Exchange Market Intervention

38 Pages Posted: 19 Jul 2000 Last revised: 18 Oct 2010

See all articles by Anna J. Schwartz

Anna J. Schwartz

City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office

Date Written: June 2000

Abstract

The premise of the paper is that the fervor for foreign exchange market intervention by U.S, and European monetary authorities has ebbed in recent years. A pattern of initial belief in the effectiveness of foreign exchange market intervention has recently been eroded, as is revealed by the absence of intervention in circumstances that in earlier times would have invoked it. Only the Bank of Japan among central banks of the developed world has not thusfar abandoned its faith that intervention can change the relative value of the yen as determined by market forces to conform with its notion of what that value should be. To explain why U.S. and European monetary authorities no longer believe that intervention is a tool that works, I review the equivocal record of past episodes, the inconclusive results of empirical research, and the problems of implementation that intervention advocates ignore.

Suggested Citation

Schwartz, Anna J., The Rise and Fall of Foreign Exchange Market Intervention (June 2000). NBER Working Paper No. w7751. Available at SSRN: https://ssrn.com/abstract=235709

Anna J. Schwartz (Contact Author)

City University of New York (CUNY) ( email )

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