IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

How To Intervene In Fx Market: Market Microstructure Approach

Listed author(s):
  • Wonchang Jang


    (Inha University)

Registered author(s):

    This paper proposes a market microstructure model of FX intervention to analyze the relationship between central bank intervention and the characteristics of the foreign exchange market. The implication of our model is that the characteristic of the exchange rate movements around central bank intervention is determined by portfolio managers¡¯ trading intensity and their boundary weights on the fundamentalist¡¯s view, market-makers¡¯ price adjustment speed and their speculative trading intensity. When the portfolio managers¡¯ trading intensity is low (thin market), central bank must operate heavy interventions to move spot exchange rate toward a target level. As the portfolio managers¡¯ boundary weight (minimum or maximum) on the fundamentalist¡¯s view increases, the influence of intervention increases. When the market-makers¡¯ price adjustment speed is fast, central bank must operate small interventions. Overall, this paper suggests that central banks need to have superior information on the characteristics of the foreign exchange market at the time the intervention operations are performed.

    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:
    Download Restriction: no

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 32 (2007)
    Issue (Month): 1 (June)
    Pages: 105-128

    in new window

    Handle: RePEc:jed:journl:v:32:y:2007:i:1:p:105-128
    Contact details of provider: Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:jed:journl:v:32:y:2007:i:1:p:105-128. 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: (Sung Y. Park)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.