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HIGH‐FREQUENCY ANALYSIS OF FOREIGN EXCHANGE INTERVENTIONS: WHAT DO WE LEARN?
Author(s) -
Menkhoff Lukas
Publication year - 2010
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2009.00582.x
Subject(s) - psychological intervention , volatility (finance) , economics , portfolio , exchange rate , foreign exchange , foreign exchange market , monetary economics , central bank , transmission channel , order (exchange) , macroeconomics , econometrics , financial economics , monetary policy , transmission (telecommunications) , computer science , psychology , telecommunications , finance , psychiatry
The high‐frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run as they are regarded as information; but they can reduce volatility overall. Ways of transmission may reach beyond the signalling channel and also include the portfolio balance and a damping channel. Finally, interventions are more successful if they obey certain conditions, such as being coordinated among central banks and going with the market and fundamentals.