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High-Frequency Analysis of Foreign Exchange Interventions: What do we learn?

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  • Lukas Menkhoff

Abstract

The high-frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run as they are regarded as information; but they can reduce volatility overall. Ways of transmission may reach beyond the signaling channel and also include theportfolio balance and a damping channel. Finally, interventions are more successful if they obey certain conditions, such as being coordinated among central banks and going with the market and fundamentals.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2473.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2473

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Keywords: foreign exchange; central bank intervention; high-frequency data; transmission channel;

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References

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Citations

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Cited by:
  1. Chen, Yu-Fu & Funke, Michael & Glanemann, Nicole, 2011. "The Signalling Channel of Central Bank Interventions: Modelling the Yen/US Dollar Exchange Rate," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-66, Scottish Institute for Research in Economics (SIRE).
  2. Michael King & Carol Osler & Dagfinn Rime, 2012. "The Market Microstructure Approach to Foreign Exchange: Looking Back and Looking Forward," Working Papers, Brandeis University, Department of Economics and International Businesss School 54, Brandeis University, Department of Economics and International Businesss School.
  3. Michael Funke & Yu-Fu Chen & Nicole Glanemann, 2011. "The Signalling Channel of Central Bank Interventions: Modelling the Yen / US Dollar Exchange Rate," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 21110, Hamburg University, Department of Economics.
  4. Ghysels, Eric & Idier, Julien & Manganelli, Simone & Vergote, Olivier, 2014. "A high frequency assessment of the ECB securities markets programme," Working Paper Series, European Central Bank 1642, European Central Bank.
  5. Lazăr, Dorina & Todea, Alexandru & Filip, Diana, 2012. "Martingale difference hypothesis and financial crisis: Empirical evidence from European emerging foreign exchange markets," Economic Systems, Elsevier, Elsevier, vol. 36(3), pages 338-350.
  6. Lukas Menkhoff, 2013. "Foreign Exchange Intervention in Emerging Markets: A Survey of Empirical Studies," The World Economy, Wiley Blackwell, vol. 36(9), pages 1187-1208, 09.
  7. Fatum, Rasmus & Pedersen, Jesper & Sørensen, Peter Norman, 2013. "The intraday effects of central bank intervention on exchange rate spreads," Journal of International Money and Finance, Elsevier, Elsevier, vol. 33(C), pages 103-117.
  8. Jaromir Benes & Andrew Berg & Rafael A Portillo & David Vavra, 2013. "Modeling Sterilized Interventions and Balance Sheet Effects of Monetary Policy in a New-Keynesian Framework," IMF Working Papers 13/11, International Monetary Fund.
  9. Amélie Charles & Olivier Darné & Jae H. Kim, 2010. "Exchange-Rate Return Predictability and the Adaptive Markets Hypothesis: Evidence from Major Foreign Exchange Rates," Working Papers hal-00547722, HAL.
  10. Masayuki Susai & Yushi Yoshida, 2012. "Central bank interventions and limit order behavior in the foreign exchange market," Discussion Papers, Kyushu Sangyo University, Faculty of Economics 56, Kyushu Sangyo University, Faculty of Economics.

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