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A transaction level study of the effects of central bank intervention on exchange rates

Payne, Richard and Vitale, Paolo (2002) A transaction level study of the effects of central bank intervention on exchange rates. Discussion paper, 355. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Identification Number: 355


We study the effects of sterilised intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transactions data between 1986 and 1995. We extend the preliminary results obtained by Fischer and Zurlinden (1991) by matching these data with intra-day indicative exchange rate quotes. Via an event study analysis we examine the effects of intervention on exchange rate returns and volatility. We find that intervention has important short-run effects on the level of exchanges rates. There are also significant intra-day effects of intervention on exchange rate volatility. All of these effects are in line with theoretical predictions and it is shown that the impact on the exchange rate level is stronger when intervention is with the market rather than when it is again the wind. Finally, we find that the market partially anticipates the information contained in interventions as the exchange rate reacts in the 15 minute interval immediately before an event.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2002 The Authors
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Date Deposited: 28 Aug 2009 09:47
Last Modified: 27 Feb 2014 15:36

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