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When Do Central Bank Interventions Influence Intra-Daily and Longer-Term Exchange Rate Movements?

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  • Kathryn M. E. Dominguez

    (University of Michigan and NBER)

Abstract

This paper examines dollar interventions by the G3 since 1989, and the reasons that trader reactions to these interventions might differ over time and across central banks. Market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders, and how this process in turn, might influence exchange rates. Using intra-daily and daily exchange-rate and intervention data, the paper analyzes the influence of interventions on exchange-rate volatility, finding evidence of both within day and daily impact effects, but little evidence that interventions influence longer term volatility.

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File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r506.pdf
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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 506.

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Length: 44 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mie:wpaper:506

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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Related research

Keywords: central bank intervention; exchange rate volatility; market-microstructure;

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References

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