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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