Does Central Bank Intervention Influence the Probability of a Speculative Attack? Evidence from the EMS

Helmut Stix

Working Papers from Oesterreichische Nationalbank (Austrian Central Bank)

Abstract: This paper studies the effects of central bank intervention during the 1992- 1993 EMS crises on the D-mark/peseta and D-mark/French franc exchange rate. In particular, it is analyzed how interventions affected the probability of a speculative attack and market participants’ expectations about realignments. The findings provide evidence that interventions seem to have increased both the expected realignment rate and the probability of a speculative attack. Furthermore, there is some evidence that this effect arises for publicly known but not for secret interventions.

Keywords: Foreign Exchange Intervention; European Monetary System; Markov Switching (search for similar items in EconPapers)
JEL-codes: E58 F31 F33 (search for similar items in EconPapers)
Pages: 52
Date: 2002-11-04
New Economics Papers: this item is included in nep-eec and nep-ifn
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Citations: View citations in EconPapers (7)

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