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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- 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.
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- Gordon H. Sellon, 1994. "Measuring monetary policy," Research Working Paper 94-12, Federal Reserve Bank of Kansas City.
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- 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.
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