NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Influence of Actual and Unrequited Interventions

Kathryn M.E. Dominguez, Freyan Panthaki

NBER Working Paper No. 12953
Issued in March 2007
NBER Program(s):   IFM

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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Document Object Identifier (DOI): 10.3386/w12953

Published: International Journal of Finance and Economics, 12, 2007, 171-200.

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