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Is foreign exchange intervention effective? Some microanalytical evidence from the Czech Republic

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  • Scalia, Antonio

Abstract

I estimate a two-equation system on the Czech koruna-euro exchange rate and order flow at hourly frequency with transactions data from the Reuters Spot Matching market in the second half of 2002, during which the Czech National Bank intervened to stem the appreciation of the koruna. I find a significant impact of order flow on the exchange rate, equal to 7.6 basis points per [euro]10 million, of which 80% persists throughout the day. The news of intervention increases the price impact of order flow by 3.9 basis points per [euro]10 million. The order flow equation yields inconclusive results.

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  • Scalia, Antonio, 2008. "Is foreign exchange intervention effective? Some microanalytical evidence from the Czech Republic," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 529-546, June.
    • Handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:529-546
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    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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