A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates
AbstractWe study the effects of sterilized intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transaction data between 1985-95.We extend preliminary analysis conducted by Fischer and Zurlinden (1999) by matching these data with intra-day indicative exchange ate quotes and with news-wire reports of central banks ’activity. Via an event study analysis we find that intervention has important short-run effects on exchange ate returns and volatility. In particular, among various results, we find that intervention i) has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks, ii) is partially anticipated by the market and iii) temporarily reduces market liquidity.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3085.
Date of creation: Nov 2001
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Other versions of this item:
- Payne, Richard & Vitale, Paolo, 2003. "A transaction level study of the effects of central bank intervention on exchange rates," Journal of International Economics, Elsevier, vol. 61(2), pages 331-352, December.
- Richard Payne, 2001. "A Transaction Level Study of the Effects of Central Bank Intervention on Exchange Rates," FMG Discussion Papers dp355, Financial Markets Group.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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- Fischer, Andreas M & Zurlinden, Mathias, 1999. "Exchange Rate Effects of Central Bank Interventions: An Analysis of Transaction Prices," Economic Journal, Royal Economic Society, vol. 109(458), pages 662-76, October.
- Vitale, Paolo, 1999. "Sterilised central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, vol. 49(2), pages 245-267, December.
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