Identifying the effects of U.S. intervention on the levels of exchange rates

Christopher Neely

No 2005-031, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Most intervention studies have been silent on the assumed structure of the economic system?implicitly imposing implausible assumptions?despite the fact that inference depends crucially on such issues. This paper identifies the cross-effects of intervention and the level of exchange rates using the likely timing of intervention, macroeconomic announcements as instruments and the nonlinear structure of the intervention reaction function. Proper identification of the effects of intervention indicates that it effectively changes the levels of exchange rates. Such inference depends on careful attention to nonlinearity and seemingly innocuous identification assumptions. ; Earlier title: Identifying the effects of central bank intervention

Keywords: Foreign exchange; Banks and banking, Central (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ifn and nep-mon
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Citations: View citations in EconPapers (10)

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