The Federal Reserve as an informed foreign-exchange trader

Owen F. Humpage

No 9815, Working Paper from Federal Reserve Bank of Cleveland

Abstract: U.S. exchange-market intervention has no apparent effect on market fundamentals but may influence expectations. If intervention can accurately forecast exchange-rate movements, knowledge that the Federal Reserve is trading can alter traders' prior estimates of the distribution of exchange-rate changes. This paper finds that U.S. intervention has value only as a forecast that recent exchange-rate movements will moderate but not that they will reverse.

Keywords: Foreign; exchange; -; Law; and; legislation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-pbe
Date: 1998
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