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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 the portfolio 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.

Suggested Citation

  • Lukas Menkhoff, 2008. "High-Frequency Analysis of Foreign Exchange Interventions: What do we learn?," CESifo Working Paper Series 2473, CESifo.
    • Handle: RePEc:ces:ceswps:_2473
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    More about this item

    Keywords

    foreign exchange; central bank intervention; high-frequency data; transmission channel;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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