An assessment of some open issues in the analysis of foreign exchange intervention

Paolo Vitale

International Journal of Finance & Economics, 2007, vol. 12, issue 2, 155-170

Abstract: We discuss some fundamental aspects of the study of foreign exchange intervention. In particular, we analyse 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 argue 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. Copyright © 2007 John Wiley & Sons, Ltd.

Date: 2007
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DOI: 10.1002/ijfe.327

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