The Federal Reserve as an Informed Foreign Exchange Trader: 1973–1995Michael Bordo, Owen Humpage and Anna Schwartz International Journal of Central Banking, 2012, vol. 8, issue 1, 127-160 Abstract: If official interventions convey private information useful for price discovery in foreign exchange markets, then they should have value as a forecast of near-term exchange rate movements. Using a set of standard criteria, we show that approximately 60 percent of all U.S. foreign exchange interventions between 1973 and 1995 were successful in this sense. This percentage, however, is no better than random. U.S. intervention sales and purchases of foreign exchange were incapable of forecasting dollar appreciations or depreciations. U.S. interventions, however, were associated with more moderate dollar movements in a manner consistent with leaning against the wind, but only 22 percent of all U.S. interventions conformed to this pattern. We also found that the larger the size of an intervention, the greater was its probability of success. In this context, most U.S. interventions appear to have been too small to have had a high probability of success. Other potential characteristics of intervention—notably, coordination and secrecy—did not seem to influence our success rates. JEL-codes: E52 E58 F31 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2012:q:1:a:6 Access Statistics for this article International Journal of Central Banking is currently edited by Loretta J. Mester More articles in International Journal of Central Banking from International Journal of Central Banking |
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