The interdealer market and the central bank intervention
AbstractThis paper studies the consequences of having either an interventionist or a non-interventionist central bank in the foreign exchange market, in a market microstructure framework. Although a simple one-period model is used, it allows the characterization of the effect of the central bank intervention on the behaviour of dealers. The model also identifies the conditions for the dealer that acts as the counterpart of the central bank to be better or worse than the other dealers. The price is expected to be more informative with an interventionist central bank.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2005/09.
Date of creation: 2005
Date of revision:
Contact details of provider:
Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
foreign exchange market; interdealer market; central bank intervention; information; market microstructure.;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- F3 - International Economics - - International Finance
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-03 (All new papers)
- NEP-CBA-2005-08-03 (Central Banking)
- NEP-FIN-2005-08-03 (Finance)
- NEP-FMK-2005-08-03 (Financial Markets)
- NEP-IFN-2005-08-03 (International Finance)
- NEP-MON-2005-08-03 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bossaerts, Peter & Hillion, Pierre, 1991. "Market Microstructure Effects of Government Intervention in the Foreign Exchange Market," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 513-41.
- Olivier Jeanne & Andrew K. Rose, 2002.
"Noise Trading And Exchange Rate Regimes,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 537-569, May.
- Jeanne, Olivier & Rose, Andrew K, 1999. "Noise Trading and Exchange Rate Regimes," CEPR Discussion Papers 2142, C.E.P.R. Discussion Papers.
- Olivier Jeanne & Andrew K Rose, 1999. "Noise trading and exchange rate regimes," Reserve Bank of New Zealand Discussion Paper Series G99/2, Reserve Bank of New Zealand.
- Olivier Jeanne & Andrew K. Rose, 1999. "Noise Trading and Exchange Rate Regimes," NBER Working Papers 7104, National Bureau of Economic Research, Inc.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Lyons, Richard K., 1997. "A simultaneous trade model of the foreign exchange hot potato," Journal of International Economics, Elsevier, vol. 42(3-4), pages 275-298, May.
- Bhattacharya, Utpal & Weller, Paul, 1992.
"The Advantage to Hiding One's Hand: Speculation and Central Bank Intervention in the Foreign Exchange Market,"
CEPR Discussion Papers
737, C.E.P.R. Discussion Papers.
- Bhattacharya, Utpal & Weller, Paul, 1997. "The advantage to hiding one's hand: Speculation and central bank intervention in the foreign exchange market," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 251-277, July.
- Chris D'Souza, 2002. "A Market Microstructure Analysis of Foreign Exchange Intervention in Canada," Working Papers 02-16, Bank of Canada.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitor Escaria).
If references are entirely missing, you can add them using this form.