TY  - JOUR
AU  - Kaminsky,Graciela
AU  - Lewis,Karen K.
TI  - Does Foreign Exchange Intervention Signal Future Monetary Policy?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4298
PY  - 1993
Y2  - March 1993
UR  - http://www.nber.org/papers/w4298
L1  - http://www.nber.org/papers/w4298.pdf
N1  - Author contact info:
Graciela L. Kaminsky
Department of Economics
George Washington University
Washington, DC  20052
Tel: 202/994-6686
Fax: 202/994-6147
E-Mail: graciela@gwu.edu

Karen K. Lewis
Department of Finance, Wharton School
2300 SHDH
University of Pennsylvania
Philadelphia, PA 19104-6367
Tel: 215/898-7637
Fax: 215/898-6200
E-Mail: lewisk@wharton.upenn.edu
AB  - A frequently cited explanation for why sterilized interventions may affect exchange rates is that these interventions signal central banks' future monetary policy intentions. This explanation presumes that central banks in fact back up interventions with subsequent changes in monetary policy. We empirically examine this hypothesis using data on market observations of U.S. intervention together with monetary policy variables, and exchange rates. We strongly reject the hypothesis that interventions convey no signal. However, we also find that in some episodes, intervention signaled changes in monetary policy in the opposite direction of the conventional signaling story. This finding can explain why in some periods exchange rates moved in the opposite direction of that suggested by intervention.
ER  -