EconPapers    
Economics at your fingertips  
 

The Federal Reserve as an informed foreign-exchange trader: 1973-1995

Michael Bordo, Owen Humpage and Anna Schwartz

No 1118, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: If official interventions convey private information useful for price discovery in foreign-exchange markets, then they should have value as a forecast of near-term exchange-rate movements. Using a set of standard criteria, we show that approximately 60 percent of all U.S. foreign-exchange interventions between 1973 and 1995 were successful in this sense. This percentage, however, is no better than random. U.S. intervention sales and purchases of foreign exchange were incapable of forecasting dollar appreciations or depreciations. U.S. interventions, however, were associated with more moderate dollar movements in a manner consistent with leaning against the wind, but only about 22 percent of all U.S. interventions conformed to this pattern. We also found that the larger the size of an intervention, the greater was its probability of success, although some interventions were inefficiently large. Other potential characteristics of intervention, notably coordination and secrecy, did not seem to influence our success rates.

Keywords: Board of Governors of the Federal Reserve System (U.S.); Foreign exchange (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-his, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.clevelandfed.org/en/Newsroom%20and%20E ... DD9EE7BB8A441BB.ashx Full text (application/pdf)

Related works:
Journal Article: The Federal Reserve as an Informed Foreign Exchange Trader: 1973–1995 (2012) Downloads
Working Paper: The Federal Reserve as an Informed Foreign Exchange Trader: 1973 - 1995 (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1118

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().

 
Page updated 2025-03-30
Handle: RePEc:fip:fedcwp:1118