IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Rules versus Discretion in Foreign Exchange Intervention: Evidence from Official Bank of Canada High-Frequency Data

  • Rasmus Fatum

    (School of Business, University of Alberta)

  • Michael R. King

    (Financial Markets Department, Bank of Canada, Ottawa)

This paper analyzes official, high-frequency Bank of Canada intervention and exchange rate data (the latter quoted at the end of every 5-minute interval over every 24-hour period) over the January 1995 to September 1998 time-period. The data is of particular interest as it spans over two distinctly different intervention regimes – one characterized by purely rules-based (“mechanistic”) intervention versus one characterized by both rules-based and discretionary intervention. This unique feature of the data allows for both a comparison of the effects of rules-based version discretionary intervention and a general investigation of intraday effects of intervention. Employing an event-study methodology and three different criteria for success, the study presents strong evidence showing that intervention systematically affects movements in the CAD/USD and in the desired direction along with some evidence that intervention is associated with a reduction of exchange rate volatility. Interestingly, there is no indication that discretionary intervention is more effective than rules-based intervention.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 05-06.

in new window

Length: 24 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:kud:epruwp:05-06
Contact details of provider: Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (+45) 3532 4411
Fax: +45 35 32 30 00
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Rasmus Fatum & Michael Hutchison, 2003. "Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan," NBER Working Papers 9648, National Bureau of Economic Research, Inc.
  2. Martin D. D. Evans & Richard K. Lyons, 2001. "Portfolio Balance, Price Impact, and Secret Intervention," NBER Working Papers 8356, National Bureau of Economic Research, Inc.
  3. Kathryn M. E. Dominguez, 2003. "When Do Central Bank Interventions Influence Intra-Daily and Longer-Term Exchange Rate Movements?," Working Papers 506, Research Seminar in International Economics, University of Michigan.
  4. Eric van Wincoop & Philippe Bacchetta, 2004. "Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?," Econometric Society 2004 North American Winter Meetings 628, Econometric Society.
  5. Fischer, Andreas M & Zurlinden, Mathias, 1999. "Exchange Rate Effects of Central Bank Interventions: An Analysis of Transaction Prices," Economic Journal, Royal Economic Society, vol. 109(458), pages 662-76, October.
  6. Christopher J. Neely, 2001. "The practice of central bank intervention: looking under the hood," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-10.
  7. Fischer, Andreas M., 2003. "Measurement error and the profitability of interventions: a closer look at SNB transactions data," Economics Letters, Elsevier, vol. 81(1), pages 137-142, October.
  8. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  9. King, Michael R, 2003. "Effective Foreign Exchange Intervention: Matching Strategies with Objectives," International Finance, Wiley Blackwell, vol. 6(2), pages 249-71, Summer.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kud:epruwp:05-06. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.