How Powerful is Unannounced, Sterilized Foreign Exchange Intervention?

26 Pages Posted: 29 Jul 2020 Last revised: 22 Feb 2021

See all articles by Alain Naef

Alain Naef

University of California, Berkeley - Department of Economics

Jacob Weber

University of California, Berkeley - Department of Economics

Date Written: July 28, 2020

Abstract

Though most central banks actively intervene on the foreign exchange market, the literature offers mixed evidence on their effectiveness: particularly for unannounced interventions. We use new, declassified data from the archives of the Bank of England and the institutional features of the Bretton Woods era to estimate the effects of intervention on the exchange rate. We find that a purchase of pounds equivalent to 1% of the money supply causes a statistically significant, 4-5 basis point appreciation in the pound.

Keywords: Monetary Policy, Foreign Exchange Markets, Bretton Woods System

JEL Classification: F3, N2

Suggested Citation

Naef, Alain and Weber, Jacob, How Powerful is Unannounced, Sterilized Foreign Exchange Intervention? (July 28, 2020). Available at SSRN: https://ssrn.com/abstract=3662258 or http://dx.doi.org/10.2139/ssrn.3662258

Alain Naef

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

Jacob Weber (Contact Author)

University of California, Berkeley - Department of Economics ( email )

Berkeley, CA
United States

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