Advanced Search
MyIDEAS: Login to save this paper or follow this series

When do central banks prefer to intervene secretly?

Contents:

Author Info

  • Ferré Carracedo, Montserrat
  • Manzano, Carolina

Abstract

Central banks often intervene secretly in the foreign exchange market. This secrecy seems to be at odds with the signalling channel. In this article we will analyse when a central bank intervening in the foreign exchange rate market purely through the signalling channel would prefer to act secretly or publicly. By using a microstructure model, we will show that the consistency of the intervention with fundamentals, the volume of noise trading, the weight given to the effectiveness of intervention and the degree of superior information held by the central bank will influence the decision to intervene secretly or publicly. Keywords: foreign exchange intervention, market microstructure. JEL Classifi…cation: D82, E58, F31, G14.

Download Info

If 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.
File URL: http://hdl.handle.net/2072/5317
Download Restriction: no

Bibliographic Info

Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/5317.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:urv:wpaper:2072/5317

Contact details of provider:
Postal: Avda. de la Universitat,1 - 43204 Reus (Tarragona)
Phone: 977 75 98 00
Fax: 977 75 98 10
Email:
Web page: http://www.urv.cat
More information through EDIRC

Related research

Keywords: Canvi exterior; Mercat exterior; Bancs centrals; 339 - Comerç. Relacions econòmiques internacionals. Economia mundial. Màrqueting;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. 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, C.E.P.R. Discussion Papers 737, C.E.P.R. Discussion Papers.
  2. Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2690, C.E.P.R. Discussion Papers.
  3. Michel Beine & Oscar Bernal Diaz & Jean-Yves Gnabo & Christelle Lecourt, 2006. "Intervention policy of the BoJ: a unified approach," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 06-15.RS, ULB -- Universite Libre de Bruxelles.
  4. Priscilla Chiu, 2003. "Transparency versus constructive ambiguity in foreign exchange intervention," BIS Working Papers 144, Bank for International Settlements.
  5. Saacke, Peter, 2002. "Technical analysis and the effectiveness of central bank intervention," Journal of International Money and Finance, Elsevier, Elsevier, vol. 21(4), pages 459-479, August.
  6. Vitale, Paolo, 1999. "Sterilised central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, Elsevier, vol. 49(2), pages 245-267, December.
  7. Leahy, Michael P, 1995. "The profitability of US intervention in the foreign exchange markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(6), pages 823-844, December.
  8. Sweeney, R. J., 2000. "Does the Fed beat the foreign-exchange market?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(5), pages 665-694, May.
  9. Chang, Yuanchen & Taylor, Stephen J., 1998. "Intraday effects of foreign exchange intervention by the Bank of Japan1," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(1), pages 191-210, February.
  10. Christopher J. Neely, 2000. "The practice of central bank intervention: looking under the hood," Working Papers, Federal Reserve Bank of St. Louis 2000-028, Federal Reserve Bank of St. Louis.
  11. Michel Beine & Oscar Bernal & Jean-Yves Gnabo & Christelle Lecourt, 2007. "Intervention Policy of the BoJ: a Unified Approach," LSF Research Working Paper Series, Luxembourg School of Finance, University of Luxembourg 07-19, Luxembourg School of Finance, University of Luxembourg.
  12. Barnett, Richard C. & Ozerturk, Saltuk, 2007. "The advantage of showing your hand selectively in foreign exchange interventions," European Journal of Political Economy, Elsevier, Elsevier, vol. 23(1), pages 228-244, March.
  13. Kathryn M. Dominguez, 1999. "The Market Microstructure of Central Bank Intervention," NBER Working Papers 7337, National Bureau of Economic Research, Inc.
  14. Engel, Charles & West, Kenneth D., 2003. "Exchange rates and fundamentals," Working Paper Series, European Central Bank 0248, European Central Bank.
  15. Owen F. Humpage, 1994. "Institutional aspects of U.S. intervention," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q I, pages 2-19.
  16. Sjoo, Boo & Sweeney, Richard J., 2001. "The foreign-exchange costs of central bank intervention: evidence from Sweden," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(2), pages 219-247, April.
  17. Christopher J. Neely, 2007. "Central bank authorities’ beliefs about foreign exchange intervention," Working Papers, Federal Reserve Bank of St. Louis 2006-045, Federal Reserve Bank of St. Louis.
  18. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1315-35, November.
  19. Manzano, Carolina, 2002. "The Effect of the Transparency of Order Flows in a Dealer Market with Several Securities," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 11(2), pages 212-227, April.
  20. Beine, Michel & Bernal, Oscar, 2007. "Why do central banks intervene secretly?: Preliminary evidence from the BoJ," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 17(3), pages 291-306, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kentaro Iwatsubo & Satoshi Kawanishi, 2011. "The Information Improving Channel of Exchange Rate Intervention: How Do Official Announcements Work?," Discussion Papers 1116, Graduate School of Economics, Kobe University.
  2. Ferré Carracedo, Montserrat & Manzano, Carolina, 2008. "Market effects of foreign exchange coordinated intervention," Working Papers, Universitat Rovira i Virgili, Department of Economics 2072/5366, Universitat Rovira i Virgili, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/5317. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ariadna Casals).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.