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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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)|
|Additional Information:||© 2002 The Authors|
|Uncontrolled Keywords:||Sterilised intervention, Foreign exchange market, Market microstructure|
|Library of Congress subject classification:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
|Journal of Economic Literature Classification System:||F - International Economics > F3 - International Finance > F31 - Foreign Exchange
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
|Sets:||Research centres and groups > Financial Markets Group (FMG)
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