The Influence of Actual and Unrequited Interventions
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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.
Published: International Journal of Finance and Economics, 12, 2007, 171-200.
This paper is available as PDF (261 K) or via email.
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