A Critical Appraisal of Recent Developments in the Analysis of Foreign Exchange Intervention

Paolo Vitale

No 5729, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We offer a critical review of recent developments in the study of foreign exchange intervention. In particular, we discuss some unresolved issues, such as the secrecy puzzle, the relevance of the signalling and portfolio-balance effect hypotheses, the identification of the impact of foreign exchange intervention on currency values. We suggest that: i) the unresolved nature of these issues is partly due to the absence of a market microstructure perspective in most of the existing analysis of foreign exchange intervention; and ii) that recent promising advances in this strand of research have not fully exploited the potential of such perspective.

Keywords: Official intervention; Foreign exchange micro structure; Exchange rate dynamics (search for similar items in EconPapers)
JEL-codes: D82 G14 G15 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-cba, nep-fin, nep-ifn, nep-mon and nep-mst
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Citations: View citations in EconPapers (3)

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