Abstract

https://ssrn.com/abstract=2692438
 


 



When is Foreign Exchange Intervention Effective? Evidence from 33 Countries


Marcel Fratzscher


DIW Berlin; Centre for Economic Policy Research (CEPR)

Oliver Gloede


Leibniz Universität Hannover

Lukas Menkhoff


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

Lucio Sarno


City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Tobias Stoehr


Kiel Institute for the World Economy; German Institute for Economic Research (DIW Berlin); IZA

November 2015

DIW Berlin Discussion Paper No. 1518

Abstract:     
This study examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and a highly effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works very well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication.

Number of Pages in PDF File: 53

Keywords: Foreign exchange intervention, exchange rate regimes, effectiveness measures, communication, capital controls

JEL Classification: F31, F33, E58


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Date posted: November 19, 2015  

Suggested Citation

Fratzscher, Marcel and Gloede, Oliver and Menkhoff, Lukas and Sarno, Lucio and Stoehr, Tobias, When is Foreign Exchange Intervention Effective? Evidence from 33 Countries (November 2015). DIW Berlin Discussion Paper No. 1518. Available at SSRN: https://ssrn.com/abstract=2692438 or http://dx.doi.org/10.2139/ssrn.2692438

Contact Information

Marcel Fratzscher (Contact Author)
DIW Berlin ( email )
Mohrenstraße 58
Berlin, 10117
Germany
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Oliver Gloede
Leibniz Universität Hannover ( email )
Welfengarten 1
D-30167 Hannover, 30167
Germany
Lukas Menkhoff
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
Lucio Sarno
City University London - Sir John Cass Business School ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tobias Stoehr
Kiel Institute for the World Economy ( email )
German Institute for Economic Research (DIW Berlin) ( email )
Mohrenstraße 58
Berlin, 10117
Germany
IZA ( email )
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