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Blowing against the Wind? A Narrative Approach to Central Bank Foreign Exchange Intervention

Alain Naef

No 188, Working Papers from European Historical Economics Society (EHES)

Abstract: Few studies on foreign exchange intervention convincingly address the causal effect of intervention on exchange rates. By using a narrative approach, I address a major issue in the literature: the endogeneity of intraday news which influence the exchange rate alongside central bank operations. Some studies find that interventions work in up to 80% of cases. Yet, by accounting for intraday market moving news, I find that in adverse conditions, the Bank of England managed to influence the exchange rate only in 8% of cases. I use both machine learning and human assessment to confirm the validity of the narrative approach.

Keywords: intervention; foreign exchange; natural language processing; central bank; Bank of England. (search for similar items in EconPapers)
JEL-codes: E5 F31 N14 N24 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-06
New Economics Papers: this item is included in nep-big, nep-cba, nep-cmp, nep-his, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Blowing against the Wind? A Narrative Approach to Central Bank Foreign Exchange Intervention (2023) Downloads
Working Paper: Blowing against the Wind? A Narrative Approach to Central Bank Foreign Exchange Intervention (2022) Downloads
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