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The Accuracy of Reports of Foreign Exchange Intervention

  • Michael W. Klein

Daily foreign exchange operations by the Federal Reserve are not revealed to the public contemporaneously or, up until recently, even years after the fact. With the recent release of daily intervention data it is now possible to gauge the accuracy of the market's perceptions of the Fed's foreign exchange intervention. In this paper we look at both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the Federal Reserve between the beginning of January 1985 and the end of December 1989. The evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 percent and that the likelihood of intervention actually occurring given that it was reported was 88 percent. Interventions which were reported by the newspaper were larger on average than those which were not reported and this difference is statistically significant. Multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention.

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File URL: http://www.nber.org/papers/w4165.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4165.

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Date of creation: Sep 1992
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Publication status: published as Journal of International Money and Finance, December 1993, Vol. 12, No. 6,pp. 644-653.
Handle: RePEc:nbr:nberwo:4165
Note: IFM
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  1. Michael W. Klein & Karen K. Lewis, 1991. "Learning About Intervention Target Zones," NBER Working Papers 3674, National Bureau of Economic Research, Inc.
  2. Hali J. Edison, 1990. "Foreign currency operations: an annotated bibliography," International Finance Discussion Papers 380, Board of Governors of the Federal Reserve System (U.S.).
  3. Kathryn M. Dominguez & Jeffrey Frankel, 1990. "Does Foreign Exchange Intervention Matter? Disentangling the Portfolio and Expectations Effects for the Mark," NBER Working Papers 3299, National Bureau of Economic Research, Inc.
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