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A Critical Appraisal of Recent Developments in the Analysis of Foreign Exchange Intervention

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  • Vitale, Paolo

Abstract

We offer a critical review of recent developments in the study of foreign exchange intervention. In particular, we discuss some unresolved issues, such as the secrecy puzzle, the relevance of the signalling and portfolio-balance effect hypotheses, the identification of the impact of foreign exchange intervention on currency values. We suggest that: i) the unresolved nature of these issues is partly due to the absence of a market microstructure perspective in most of the existing analysis of foreign exchange intervention; and ii) that recent promising advances in this strand of research have not fully exploited the potential of such perspective.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5729.

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Date of creation: Jun 2006
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Handle: RePEc:cpr:ceprdp:5729

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Keywords: exchange rate dynamics; foreign exchange micro structure; official intervention;

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References

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Cited by:
  1. Ferré Carracedo, Montserrat & Manzano, Carolina, 2008. "Market effects of foreign exchange coordinated intervention," Working Papers 2072/5366, Universitat Rovira i Virgili, Department of Economics.
  2. Beine, Michel & Bernal, Oscar & Gnabo, Jean-Yves & Lecourt, Christelle, 2009. "Intervention policy of the BoJ: A unified approach," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 904-913, May.

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