publication . Article . 2017

Central banks should communicate their interventions in the foreign exchange market

Menkhoff, Lukas; Stöhr, Tobias;
Open Access English
  • Published: 01 Jan 2017
  • Publisher: Berlin: Deutsches Institut für Wirtschaftsforschung (DIW)
Abstract
Central banks frequently intervene in foreign exchange markets. Using recognized criteria this report analyzes the probability of success in a data set of 4,500 intervention episodes in 33 countries. It is important to differentiate among exchange rate regimes because each focuses on a different goal. While flexible exchange rate regimes intervene less frequently and seek to influence trends, other regimes target exchange rate stabilization by establishing a band within which the exchange rate can float. Interventions are generally more successful when they involve larger volumes, follow the exchange rate trend, and are oriented on the fundamental value. When de...
Subjects
free text keywords: F31, F33, E58, foreign exchange intervention, exchange rate regimes, actual interventions, communication, ddc:330
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Article . 2017
Provider: EconStor
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