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Oral Interventions Versus Actual Interventions in Fx Markets - An Event-Study Approach

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  • Marcel Fratzscher

Abstract

The article assesses whether exchange rate communication - or oral intervention - has been an effective policy tool for monetary authorities to influence exchange rates. It employs an event-study methodology that identifies intervention clusters or events. For the euro-dollar and the dollar-yen exchange rates, the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium-run. The article shows that the success of intervention events is related to market conditions and to the coordination among policy makers. It also finds that the success of communication and actual interventions is largely unrelated to monetary policy, thus suggesting that interventions primarily function through a coordination channel. Copyright � The Author(s). Journal compilation � Royal Economic Society 2008.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 530 (07)
Pages: 1079-1106

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Handle: RePEc:ecj:econjl:v:118:y:2008:i:530:p:1079-1106

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Cited by:
  1. Oscar Bernal Diaz & Jean-Yves Gnabo, 2007. "Talks, financial operations or both? Generalizing central banks' FX reaction functions," DULBEA Working Papers 07-03.RS, ULB -- Universite Libre de Bruxelles.
  2. Dewachter, Hans & Erdemlioglu, Deniz & Gnabo, Jean-Yves & Lecourt, Christelle, 2014. "The intra-day impact of communication on euro-dollar volatility and jumps," Journal of International Money and Finance, Elsevier, vol. 43(C), pages 131-154.
  3. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
  4. Égert, Balázs & Kočenda, Evžen, 2014. "The impact of macro news and central bank communication on emerging European forex markets," Economic Systems, Elsevier, vol. 38(1), pages 73-88.
  5. Gnabo, Jean-Yves & Teiletche, Jérôme, 2009. "Foreign-exchange intervention strategies and market expectations: insights from Japan," Economics Papers from University Paris Dauphine 123456789/647, Paris Dauphine University.
  6. Fratzscher, Marcel & Mehl, Arnaud, 2009. "Do China and oil exporters influence major currency configurations?," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 335-358, September.
  7. Charles Engel, 2013. "Exchange Rates and Interest Parity," NBER Working Papers 19336, National Bureau of Economic Research, Inc.
  8. Petra Geraats, 2014. "Monetary Policy Transparency," CESifo Working Paper Series 4611, CESifo Group Munich.
  9. Moura, Marcelo L. & Pereira, Fatima R. & Attuy, Guilherme de Moraes, 2013. "Currency Wars in Action: How Foreign Exchange Interventions Work in an Emerging Economy," Insper Working Papers wpe_304, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  10. Beine, Michel & Janssen, Gust & Lecourt, Christelle, 2009. "Should central bankers talk to the foreign exchange markets?," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 776-803, September.

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