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The foreign exchange market interventions of the European Central Bank

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  • M. Frenkel

    ()
    (WHU Koblenz, Department of Economics, Macroeconomics and International Economics, Vallendar)

  • C. Pierdzionc

    ()
    (Institute of World Economics, Financial Markets Group, Kiel (Germany))

  • G. Stadtmann

    ()
    (WHU Koblenz, Department of Economics, Macroeconomics and International Economics, Vallendar (Germany))

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    Abstract

    We analyze the effectiveness of the foreign exchange market interventionsconducted by the European Central Bank (ECB) in the fall of 2000 to support the external stability of the euro. To this end, we discuss different channels through whichinterventions may influence exchange rate dynamics. We use the insights provided by the theoretical and empirical literature to evaluate the effectiveness of theintervention policy of the ECB. In addition, we present an empirical analysis in which we use intra-daily exchange rate data to examine in detail the effects of theinterventions. We find that the interventions only had a rather short-term impact on the exchange rate path and had no effects beyond the short term. Therefore, our results suggest that the intervention policy of the ECB was not effective.

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    Bibliographic Info

    Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

    Volume (Year): 54 (2001)
    Issue (Month): 218 ()
    Pages: 249-287

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    Handle: RePEc:psl:bnlaqr:2001:32

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    Related research

    Keywords: Exchange Rates; Foreign Exchange;

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    Cited by:
    1. Christian Pierdzioch & Georg Stadtmann, 2004. "The Effectiveness of the Interventions of the Swiss National Bank - An Event-Study Analysis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(II), pages 229-244, June.
    2. Frenkel, Michael & Pierdzioch, Christian & Stadtmann, Georg, 2006. "The transparency of the ECB policy: What can we learn from its foreign exchange market interventions?," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 141-156, February.
    3. Rasmus Fatum & Michael Hutchison, 2002. "ECB Foreign Exchange Intervention and the EURO: Institutional Framework, News, and Intervention," Open Economies Review, Springer, vol. 13(4), pages 413-425, October.
    4. Christian Pierdzioch & Georg Stadtmann, 2003. "The Effectiveness of the Interventions of the Swiss National Bank � An Event-Study Analysis," Kiel Working Papers 1160, Kiel Institute for the World Economy.
    5. David-Jan Jansen & Jakob de Haan, 2005. "Were Verbal Efforts to Support the Euro Effective? A High-Frequency Analysis of ECB Statements," DNB Working Papers 033, Netherlands Central Bank, Research Department.
    6. Michael Frenkel & Christian Pierdzioch & Georg Stadtmann, 2002. "Devisenmarktoperationen und Informationspolitik der Europäischen Zentralbank," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(1), pages 49-68, 02.
    7. Jansen, David-Jan & De Haan, Jakob, 2005. "Talking heads: the effects of ECB statements on the euro-dollar exchange rate," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 343-361, March.
    8. D. Jansen & J. de Haan, 2003. "Statements of ECB Officials and their Effect on the Level and Volatility of the Euro-Dollar Exchange Rate," WO Research Memoranda (discontinued) 726, Netherlands Central Bank, Research Department.

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