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The interventions of the European Central Bank: Effects, effectiveness, and policy implications

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  • Frenkel, Michael
  • Stadtmann, Georg
  • Pierdzioch, Christian

Abstract

We analyze the effectiveness of the foreign exchange market interventions conducted by the European Central Bank (ECB) in the fall of 2000 to support the external stability of the euro. To this end, in a first step different channels through which interventions may influence exchange rate dynamics are discussed. In a second step, a review of the existing empirical literature on the effectiveness of central bank interventions is used as the basis for evaluating the effectiveness of the ECB's intervention policy. Against this background, high-frequency exchange-rate data are used to examine the effects of the interventions. We present evidence that the interventions only had a very short-term impact on the exchange rate path with no medium-term effects. All in all, our results suggest that the ECB's intervention policy was not effective. --

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Bibliographic Info

Paper provided by Deutsche Bank Research in its series Research Notes with number 01-2.

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Date of creation: 2001
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Handle: RePEc:zbw:dbrrns:012

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Keywords: European Central Bank; Foreign exchange market interventions;

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Cited by:
  1. Beine, Michel & Benassy-Quere, Agnes & MacDonald, Ronald, 2007. "The impact of central bank intervention on exchange-rate forecast heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 38-63, March.
  2. Michel Beine & Ariane Szafarz, 2003. "The design of effective Central Bank interventions: the yen/dollar case," Working Papers CEB, ULB -- Universite Libre de Bruxelles 03-008.RS, ULB -- Universite Libre de Bruxelles.

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