Impact of Central Bank Intervention during Periods of Speculative Pressure: Evidence from the European Monetary System

Helmut Stix

German Economic Review, 2007, vol. 8, issue 3, 399-427

Abstract: This paper studies the effects of Banco de Espanna and Banque de France interventions during the 1992-93 European Monetary System crises. In particular, a Markov Switching model is estimated where interventions influence the probabilities of transition between a calm and a turbulent regime. Furthermore, we analyze the impact of intervention on the expected rate of realignment. On balance, the results are consistent with the view that publicly known interventions but not secret interventions increased both the probability of switching to the turbulent regime as well as the expected realignment rate.

Keywords: European Monetary System; foreign exchange intervention; Markov Switching (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1111/j.1468-0475.2007.00412.x

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