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When Do Central Bank Interventions Influence Intra-Daily and Longer-Term Exchange Rate Movements?

Author

Listed:
  • Kathryn M. E. Dominguez

    (University of Michigan and NBER)

Abstract
This paper examines dollar interventions by the G3 since 1989, and the reasons that trader reactions to these interventions might differ over time and across central banks. Market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders, and how this process in turn, might influence exchange rates. Using intra-daily and daily exchange-rate and intervention data, the paper analyzes the influence of interventions on exchange-rate volatility, finding evidence of both within day and daily impact effects, but little evidence that interventions influence longer term volatility.

Suggested Citation

  • 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.
    • Handle: RePEc:mie:wpaper:506
    as

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    File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r506.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    central bank intervention; exchange rate volatility; market-microstructure;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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