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Intervention Policy under Floating Exchange Rates: An Analysis of the Swiss Case

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  • Gartner, Manfred

Abstract

Empirical analyses of central bank foreign-exchange market intervention are typically cast in terms of a dichotomy between "leaning against the wind" and "exchange-rate targeting." Apparently, the profession has arrived at an almost unanimous verdict in favor of the former. Th is paper challenges the ruling consensus. Econometric estimates are c omputed on the basis of a more flexible intervention response functio n and a new proposal for removing simultaneous-equations bias in the context of intervention analyses. The obtained results suggest that, in situations of conflict, the Swiss National Bank has given priority to exchange-rate targeting over exchange-rate smoothing. Copyright 1987 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 54 (1987)
Issue (Month): 216 (November)
Pages: 439-53

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Handle: RePEc:bla:econom:v:54:y:1987:i:216:p:439-53

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Cited by:
  1. Douglas Hodgson, 2011. "A test for the presence of central bank intervention in the foreign exchange market with an application to the Bank of Canada," Empirical Economics, Springer, vol. 41(3), pages 681-701, December.
  2. Pippenger, John, 2003. "Modeling foreign exchange intervention: stock versus stock adjustment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(2), pages 137-156, April.
  3. Christopher J. Neely, 2000. "Are changes in foreign exchange reserves well correlated with official intervention?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 17-32.
  4. Francisco Ledesma-Rodríguez & Manuel Navarro-Ibáñez & Jorge Pérez-Rodríguez & Simón Sosvilla-Rivero, 2006. "Implicit Bands in the Yen/Dollar Exchange Rate," Working Papers 2006-19, FEDEA.
  5. Pippenger, John, 2007. "How should we think about markets for foreign exchange?," University of California at Santa Barbara, Economics Working Paper Series qt3w40w1b5, Department of Economics, UC Santa Barbara.
  6. Aliya Algozhina, 2012. "Monetary and Fiscal Policy Interactions in an Emerging Open Economy: A Non-Ricardian DSGE Approach," CERGE-EI Working Papers wp476, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  7. Frenkel, Michael & Pierdzioch, Christian & Stadtmann, Georg, 2005. "Japanese and U.S. interventions in the yen/U.S. dollar market: estimating the monetary authorities' reaction functions," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 680-698, September.
  8. Douglas James Hodgson, 2009. "A Test for the Presence of Central Bank Intervention in the Foreign Exchange Market With an Application to the Bank of Canada," CIRANO Working Papers 2009s-14, CIRANO.

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