A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates
45 Pages Posted: 18 Dec 2001
Date Written: November 2001
Abstract
We study the effects of sterilized intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transaction data between 1985-95.We extend preliminary analysis conducted by Fischer and Zurlinden (1999) by matching these data with intra-day indicative exchange ate quotes and with news-wire reports of central banks' activity. Via an event study analysis we find that intervention has important short-run effects on exchange ate returns and volatility. In particular, among various results, we find that intervention i) has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks, ii) is partially anticipated by the market and iii) temporarily reduces market liquidity.
Keywords: Sterilized intervention, foreign exchange market, market microstructure
JEL Classification: F31, G14, G15
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Official Intervention in the Foreign Exchange Market: Is it Effective, and, If so, How Does it Work?
By Mark P. Taylor and Lucio Sarno
-
By Gabriele Galati and William R. Melick
-
U.S. Intervention: Assessing the Probability of Success
By Owen Humpage
-
Does Central Bank Intervention Increase the Volatility of Foreign Exchange Rates?
-
Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s
-
Does Foreign Exchange Intervention Signal Future Monetary Policy?
By Graciela Kaminsky and Karen K. Lewis
-
The Practice of Central Bank Intervention: Looking Under the Hood
-
Is Sterilized Foreign Exchange Intervention Effective after All? An Event Study Approach
By Rasmus Fatum and Michael M. Hutchison