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U.S. Intervention: Assessing the Probability of Success

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  • Humpage, Owen F

Abstract

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.

Suggested Citation

  • Humpage, Owen F, 1999. "U.S. Intervention: Assessing the Probability of Success," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 731-747, November.
    • Handle: RePEc:mcb:jmoncb:v:31:y:1999:i:4:p:731-47
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