A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates

Richard Payne () and Paolo Vitale ()

No 3085, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the effects of sterilized intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transaction data between 1985-95.We extend preliminary analysis conducted by Fischer and Zurlinden (1999) by matching these data with intra-day indicative exchange ate quotes and with news-wire reports of central banks ’activity. Via an event study analysis we find that intervention has important short-run effects on exchange ate returns and volatility. In particular, among various results, we find that intervention i) has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks, ii) is partially anticipated by the market and iii) temporarily reduces market liquidity.

Keywords: foreign exchange market; market microstructure; sterilized intervention (search for similar items in EconPapers)
JEL-codes: F31 G14 G15 (search for similar items in EconPapers)
Date: 2001-11
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Journal Article: A transaction level study of the effects of central bank intervention on exchange rates (2003)
Working Paper: A Transaction Level Study of the Effects of Central Bank Intervention on Exchange Rates (2001)
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