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The Influence of Actual and Unrequited Interventions

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Author Info
Kathryn M.E. Dominguez
Freyan Panthaki
Abstract

Intervention operations are used by governments to manage their exchange rates but officials rarely confirm their presence in the market, leading inevitably to erroneous reports in the financial press. There are also reports of what we term, unrequited interventions, interventions that the market expects but do not materialize. In this paper we examine the effects of various types of intervention news on intra-day exchange rate behavior. We find that unrequited interventions have a statistically significant influence on returns, volatility and order flow, suggesting that the expectation of intervention, even when governments do not intervene, can affect currency values.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12953.

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Date of creation: Mar 2007
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Publication status: published as International Journal of Finance and Economics, 12, 2007, 171-200.
Handle: RePEc:nbr:nberwo:12953

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Find related papers by JEL classification:
F3 - International Economics - - International Finance
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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  39. repec:rus:hseeco:21608 is not listed on IDEAS
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(explanations, 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.)

  1. Michael Melvin & Lukas Menkhoff & Maik Schmeling, 2008. "Automating Exchange Rate Target Zones: Intervention via an Electronic Limit Order Book," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank communication and monetary policy - a survey of theory and evidence," Working Paper Series 898, European Central Bank. [Downloadable!]
    Other versions:
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