Market effects of foreign exchange coordinated intervention

Montserrat Ferré Carracedo and Carolina Manzano ()

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: In this article we develop a theoretical microstructure model of coordinated central bank intervention based on asymmetric information. We study the economic implications of coordination on some measures of market quality and show that the model predicts higher volatility and more significant exchange rate changes when central banks coordinate compared to when they intervene unilaterally. Both these predictions are in line with empirical evidence. Keywords: coordinated foreign exchange intervention, market microstructure. JEL Classification: D82, E58, F31, G14

Keywords: Bancs centrals; Planificació centralitzada; Models economètrics; Estructura econòmica; 338 - Situació econòmica. Política econòmica. Gestió; control i planificació de l'economia. Producció. Serveis. Turisme. Preus (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/5366

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