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The Influence of Actual and Unrequited Interventions

  • Kathryn M. E. Dominguez

    (University of Michigan and NBER)

  • Freyan Panthaki

    (London School of Economics)

Intervention operations are used by governments to manage their exchange rates but officials rarely confirm their presence in the market, leading inevitably to erroneous reports in the financial press. There are also reports of what we term, unrequited interventions, interventions that the market expects but do not materialize. In this paper we examine the effects of various types of intervention news on intra-day exchange rate behavior. We find that unrequited interventions have a statistically significant influence on returns, volatility and order flow, suggesting that the expectation of intervention, even when governments do not intervene, can affect currency values.

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File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers551-575/r561.pdf
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 561.

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Length: 41 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mie:wpaper:561
Contact details of provider: Postal: ANN ARBOR MICHIGAN 48109
Web page: http://fordschool.umich.edu/rsie/

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