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Real-time effects of central bank intervention in the euro market

  • Fatum, Rasmus
  • Pedersen, Jesper

This paper investigates the real-time effects of sterilized foreign exchange intervention using official intraday intervention data provided by the Danish central bank. Our analysis employs a two-step weighted least squares estimation procedure. We control for macro surprises, address the issue of endogeneity, and carry out an array of robustness tests. Only when the direction of intervention is consistent with the monetary policy stance do we find that intervention exerts a significant influence on exchange rate returns.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 78 (2009)
Issue (Month): 1 (June)
Pages: 11-20

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Handle: RePEc:eee:inecon:v:78:y:2009:i:1:p:11-20
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  6. Andreas M. Fischer, 2005. "On the Inadequacy of Newswire Reports for Empirical Research on Foreign Exchange Interventions," Working Papers 2005-02, Swiss National Bank.
  7. Eduard Hochreiter & Pierre Siklos, 2006. "Introductory Remarks for the "Contemporary Economic Policy" Special Section on "Monetary Policy Issues of New EU-Member and Candidate Countries"," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 473-474, October.
  8. BEINE, Michel & LAURENT, Sébastien & PALM, Franz, 2004. "Central Bank forex interventions assessed using realized moments," CORE Discussion Papers 2004001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Kathryn M. Dominguez, 1999. "The Market Microstructure of Central Bank Intervention," NBER Working Papers 7337, National Bureau of Economic Research, Inc.
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  18. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Working Papers 2005-030, Federal Reserve Bank of St. Louis.
  19. Peter Brandner & Harald Grech & Helmut Stix, 2001. "The Effectiveness of Central Bank Intervention in the EMS: The Post 1993 Experience," Working Papers 55, Oesterreichische Nationalbank (Austrian Central Bank).
  20. Owen F. Humpage, 1996. "U.S. intervention: assessing the probability of success," Working Paper 9608, Federal Reserve Bank of Cleveland.
  21. 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 2690, C.E.P.R. Discussion Papers.
  22. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2006. "Real-time price discovery in global stock, bond and foreign exchange markets," International Finance Discussion Papers 871, Board of Governors of the Federal Reserve System (U.S.).
  23. Owen F. Humpage, 2003. "Government intervention in the foreign exchange market," Working Paper 0315, Federal Reserve Bank of Cleveland.
  24. Naranjo, Andy & Nimalendran, M, 2000. "Government Intervention and Adverse Selection Costs in Foreign Exchange Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 453-77.
  25. Dacorogna, Michael M. & Muller, Ulrich A. & Nagler, Robert J. & Olsen, Richard B. & Pictet, Olivier V., 1993. "A geographical model for the daily and weekly seasonal volatility in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 12(4), pages 413-438, August.
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