Large versus Small Foreign Exchange Interventions
37 Pages Posted: 1 Apr 2014 Last revised: 8 Apr 2015
Date Written: March 11, 2014
We use non-temporal threshold analysis to investigate the exchange rate effects of large versus small interventions. More than two decades of official daily data on intervention in the JPY/USD market facilitate our analysis. We find no evidence that small interventions exert a discernible influence on the exchange rate while large interventions significantly influence the exchange rate in the theoretically consistent manner. We conclude that small interventions may not be considered a determinant of the exchange rate while large interventions constitute an important element in our understanding, and modelling, of the exchange rate.
Keywords: foreign exchange market intervention, intervention amount
JEL Classification: E52, F31, G14
Suggested Citation: Suggested Citation