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Dollar intervention and the deutschemark-dollar exchange rate: a daily time-series model


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  • Owen F. Humpage


This paper develops a simultaneous time-series model to investigate the daily interactions between official exchange-market intervention and movements in the deutschemark-dollar exchange rate, from November 2, 1978, to October 31, 1979. the model is constructed using both morning-opening and afternoon-closing exchange-rate quotes, Using these two quotes, and making assumptions about the timing of intervention relative to the exchange-rate quotes, enables us to measure the causal relationships among contemporaneous variables, the results suggest that, over the period investigated, the Federal Reserve responded to exchange-rate movements in a manner consistent with a leaning-against-the-wind strategy, but that this intervention tended to accentuate slightly movements in the rate. This result seems to support claims that traders recognized intervention and traded against it.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 8404.

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Date of creation: 1984
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Handle: RePEc:fip:fedcwp:8404

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Keywords: Foreign exchange administration;


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Cited by:
  1. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Nov, pages 685-718.
  2. Owen F. Humpage & William P. Osterberg, 1990. "Intervention and the foreign exchange risk premium: an empirical investigation of daily effects," Working Paper, Federal Reserve Bank of Cleveland 9009, Federal Reserve Bank of Cleveland.
  3. Pasquariello, Paolo, 2007. "Informative trading or just costly noise? An analysis of Central Bank interventions," Journal of Financial Markets, Elsevier, Elsevier, vol. 10(2), pages 107-143, May.
  4. Owen F. Humpage, 1991. "Central-bank intervention: recent literature, continuing controversy," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q II, pages 12-26.


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