U.S. Intervention: Assessing the Probability of Success
The martingale nature of exchange-rate changes insures that intervention often will appear successful in terms of altering or moderating exchange-rate movements, even if intervention were ineffective and undertaken randomly. I provide evidence that intervention generally lacks forecast value, except under a weak leaning-against-the-wind criterion. When I condition the probability of success by various aspects or techniques of intervention, however, I find that central-bank coordination and, to a lesser extent, large interventions increases the probability of success.
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Volume (Year): 31 (1999)
Issue (Month): 4 (November)
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References listed on IDEAS
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- Owen F. Humpage, 1988. "Intervention and the dollar's decline," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-16.
- Gordon H. Sellon, 1994. "Measuring monetary policy," Research Working Paper 94-12, Federal Reserve Bank of Kansas City.
- Edison, H.J., 1993. "The Effectiveness of Central-Bank Intervention: A Survey of the Litterature after 1982," Princeton Studies in International Economics 18, International Economics Section, Departement of Economics Princeton University,.
- Loopesko, Bonnie E., 1984. "Relationships among exchange rates, intervention, and interest rates: An empirical investigation," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 257-277, December.
- Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 161-190, February.
- Donald B. Adams & Dale W. Henderson, 1983. "Definition and measurement of exchange market intervention," Staff Studies 126, Board of Governors of the Federal Reserve System (U.S.).
- Eijffinger, S.C.W., 1991. "Empirical evidence on foreign exchange market intervention : Where do we stand?," Other publications TiSEM e280156a-07fa-4c3e-aa4f-6, Tilburg University, School of Economics and Management.
- William P. Osterberg & Rebecca Wetmore Humes, 1993. "The inaccuracy of newspaper reports of U.S. foreign exchange intervention," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 25-33.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-161, January.
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