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Reuters News Reports versus Official Interventions: A Cautionary Warning

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Abstract

Reuters reports have become an accepted tool for empirical studies analyzing informationa l asymmetries in exchange rate markets. This paper tests the accuracy of the Reuters announcements for Swiss interventions. The evidence finds that the Reuters announcements are not concentrated just after the first intervention transaction as is assumed in empirical studies. The variance of the prediction error is measured in hours and not in minutes. A further assumption that the Reuters announcement always falls after the first actual transaction is found to be violated. At a minimum, the new empirical results question the accuracy of Reuters reports for small countries.

Suggested Citation

  • Andreas Fischer, 2003. "Reuters News Reports versus Official Interventions: A Cautionary Warning," Working Papers 03.06, Swiss National Bank, Study Center Gerzensee.
  • Handle: RePEc:szg:worpap:0306
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    References listed on IDEAS

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    1. Klein, Michael W., 1993. "The accuracy of reports of foreign exchange intervention," Journal of International Money and Finance, Elsevier, vol. 12(6), pages 644-653, December.
    2. Dominguez, Kathryn M. E., 2003. "The market microstructure of central bank intervention," Journal of International Economics, Elsevier, pages 25-45.
    3. Michael Melvin & Bettina Peiers, 1998. "Twice a day or continuously? Observation frequency and inference on foreign exchange volatility persistence," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 44-53, March.
    4. 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 662-676, October.
    5. repec:rus:hseeco:21608 is not listed on IDEAS
    6. Sapp, Stephen G., 2002. "Price Leadership in the Spot Foreign Exchange Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(03), pages 425-448, September.
    7. Payne, Richard & Vitale, Paolo, 2003. "A transaction level study of the effects of central bank intervention on exchange rates," Journal of International Economics, Elsevier, pages 331-352.
    8. Philippe Jorion, 1996. "Risk and Turnover in the Foreign Exchange Market," NBER Chapters,in: The Microstructure of Foreign Exchange Markets, pages 19-40 National Bureau of Economic Research, Inc.
    9. Dominguez, Kathryn M.E., 2006. "When do central bank interventions influence intra-daily and longer-term exchange rate movements?," Journal of International Money and Finance, Elsevier, vol. 25(7), pages 1051-1071, November.
    10. 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.
    11. Richard K. Lyons, 1996. "Foreign Exchange Volume: Sound and Fury Signifying Nothing?," NBER Chapters,in: The Microstructure of Foreign Exchange Markets, pages 183-208 National Bureau of Economic Research, Inc.
    12. Peiers, Bettina, 1997. " Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1589-1614, September.
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    Citations

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    Cited by:

    1. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 685-718.
    2. Neely, Christopher J., 2008. "Central bank authorities' beliefs about foreign exchange intervention," Journal of International Money and Finance, Elsevier, pages 1-25.
    3. Paolo Vitale, 2007. "An assessment of some open issues in the analysis of foreign exchange intervention," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 155-170.
    4. Pasquariello, Paolo, 2007. "Informative trading or just costly noise? An analysis of Central Bank interventions," Journal of Financial Markets, Elsevier, vol. 10(2), pages 107-143, May.
    5. Huang, Zhaodan, 2007. "The central bank and speculators in the foreign exchange market under asymmetric information: A strategic approach and evidence," Journal of Economics and Business, Elsevier, vol. 59(1), pages 28-50.
    6. Fatum, Rasmus & Pedersen, Jesper, 2009. "Real-time effects of central bank intervention in the euro market," Journal of International Economics, Elsevier, pages 11-20.
    7. Kim, Suk-Joong, 2007. "Intraday evidence of efficacy of 1991-2004 Yen intervention by the Bank of Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(4), pages 341-360, October.
    8. Paul Moser-Boehm, 2005. "Governance aspects of foreign exchange interventions," BIS Papers chapters,in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 19-39 Bank for International Settlements.
    9. Christopher J. Neely, 2006. "Identifying the effects of U.S. intervention on the levels of exchange rates," Working Papers 2005-031, Federal Reserve Bank of St. Louis.
    10. Dominguez, Kathryn M.E., 2006. "When do central bank interventions influence intra-daily and longer-term exchange rate movements?," Journal of International Money and Finance, Elsevier, vol. 25(7), pages 1051-1071, November.
    11. Áron Gereben & György Gyomai & Norbert Kiss M., 2005. "The microstructure approach to exchange rates: a survey from a central bank’s viewpoint," MNB Occasional Papers 2005/42, Magyar Nemzeti Bank (Central Bank of Hungary).
    12. Kim, Suk-Joong & Pham, Cyril Minh Dao, 2006. "Is foreign exchange intervention by central banks bad news for debt markets?: A case of Reserve Bank of Australia's interventions 1986-2003," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(5), pages 446-467, December.
    13. Jean-Yves Gnabo & Christelle Lecourt, 2008. "Foreign Exchange Intervention Policy: With or Without Transparency? The Case of Japan," Economie Internationale, CEPII research center, issue 113, pages 5-34.
    14. Vitale, Paolo, 2006. "A Critical Appraisal of Recent Developments in the Analysis of Foreign Exchange Intervention," CEPR Discussion Papers 5729, C.E.P.R. Discussion Papers.

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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