Authorities' Beliefs About Foreign Exchange Intervention: Getting Back Under the Hood

FRB of St. Louis Working Paper No. 2006-045B

41 Pages Posted: 20 Jul 2006

See all articles by Christopher J. Neely

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Date Written: December 2006

Abstract

This paper presents the results of a survey of monetary authorities with respect to their beliefs about foreign exchange intervention. The survey provides evidence on new intervention issues that would be difficult to investigate otherwise, such as conditional response times, non-foreign exchange factors in intervention and beliefs about profitability. At the same time, the survey provides new evidence on issues that have been investigated with other methods, such as channels of effectiveness, effect on currency components, profitability, and motivations for secrecy. Respondents disagreed with the predominant views on intervention's effect on volatility and common arguments against intervention. The exchange rate regime of a central bank explains its beliefs about several important aspects of intervention, including factors in a successful intervention and the potential profitability of intervention.

Keywords: Intervention, foreign exchange, survey, central bank

JEL Classification: F31, E58, F42

Suggested Citation

Neely, Christopher J., Authorities' Beliefs About Foreign Exchange Intervention: Getting Back Under the Hood (December 2006). FRB of St. Louis Working Paper No. 2006-045B, Available at SSRN: https://ssrn.com/abstract=917814 or http://dx.doi.org/10.2139/ssrn.917814

Christopher J. Neely (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

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HOME PAGE: http://www.stls.frb.org/research/econ/cneely/

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