The interdealer market and the central bank intervention

Paula Albuquerque

No 2005/09, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: This paper studies the consequences of having either an interventionist or a non-interventionist central bank in the foreign exchange market, in a market microstructure framework. Although a simple one-period model is used, it allows the characterization of the effect of the central bank intervention on the behaviour of dealers. The model also identifies the conditions for the dealer that acts as the counterpart of the central bank to be better or worse than the other dealers. The price is expected to be more informative with an interventionist central bank.

Keywords: foreign exchange market; interdealer market; central bank intervention; information; market microstructure. (search for similar items in EconPapers)
JEL-codes: D4 D8 F3 G1 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cba, nep-fin, nep-fmk, nep-ifn and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp92005

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