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A Critical Appraisal of Recent Developments in the Analysis of Foreign Exchange Intervention

  • Vitale, Paolo

We offer a critical review of recent developments in the study of foreign exchange intervention. In particular, we discuss some unresolved issues, such as the secrecy puzzle, the relevance of the signalling and portfolio-balance effect hypotheses, the identification of the impact of foreign exchange intervention on currency values. We suggest that: i) the unresolved nature of these issues is partly due to the absence of a market microstructure perspective in most of the existing analysis of foreign exchange intervention; and ii) that recent promising advances in this strand of research have not fully exploited the potential of such perspective.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5729.

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Date of creation: Jun 2006
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Handle: RePEc:cpr:ceprdp:5729
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  1. Beine, Michel & Benassy-Quere, Agnes & Lecourt, Christelle, 2002. "Central bank intervention and foreign exchange rates: new evidence from FIGARCH estimations," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 115-144, February.
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  33. Saacke, Peter, 2002. "Technical analysis and the effectiveness of central bank intervention," Journal of International Money and Finance, Elsevier, vol. 21(4), pages 459-479, August.
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  35. Lewis, Karen K, 1995. "Are Foreign Exchange Intervention and Monetary Policy Related, and Does It Really Matter?," The Journal of Business, University of Chicago Press, vol. 68(2), pages 185-214, April.
  36. Fischer, Andreas M, 2004. "Reuters News Reports versus Official Interventions: The Inaccuracy of Reuters Reports for Swiss Interventions," CEPR Discussion Papers 4359, C.E.P.R. Discussion Papers.
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