The impact of central bank intervention on exchange-rate forecast heterogeneity

Michel Beine; Agnès Bénassy-Quéré; Ronald MacDonald

doi:10.1016/j.jjie.2005.06.001

The impact of central bank intervention on exchange-rate forecast heterogeneity

Michel Beine^*, Agnès Bénassy-Quéré, Ronald MacDonald

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

We investigate the impact of official foreign exchange intervention on forecast heterogeneity, on the basis of a sample of forecasts made by a large number of commercial banks over two distinct periods, for the DEM (or EUR) and the JPY against the USD. We show that heterogeneity increases as a result of foreign exchange intervention. In the case of the DEM-EUR/USD market this increase is due to unexpected intervention, while for the JPY/USD it is due to expected intervention. Our results also emphasise the role of rumours, especially for the JPY/USD. In sum, official interventions are shown to move market opinions, albeit differently across the two markets. J. Japanese Int. Economies 21 (1) (2007) 38-63.

Original language	English
Pages (from-to)	38-63
Number of pages	26
Journal	Journal of the Japanese and International Economies
Volume	21
Issue number	1
DOIs	https://doi.org/10.1016/j.jjie.2005.06.001
Publication status	Published - Mar 2007

Keywords

Central bank intervention
Foreign exchange markets
Market micro-structure
Survey expectations

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10.1016/j.jjie.2005.06.001

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abstract = "We investigate the impact of official foreign exchange intervention on forecast heterogeneity, on the basis of a sample of forecasts made by a large number of commercial banks over two distinct periods, for the DEM (or EUR) and the JPY against the USD. We show that heterogeneity increases as a result of foreign exchange intervention. In the case of the DEM-EUR/USD market this increase is due to unexpected intervention, while for the JPY/USD it is due to expected intervention. Our results also emphasise the role of rumours, especially for the JPY/USD. In sum, official interventions are shown to move market opinions, albeit differently across the two markets. J. Japanese Int. Economies 21 (1) (2007) 38-63.",

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author = "Michel Beine and Agn{\`e}s B{\'e}nassy-Qu{\'e}r{\'e} and Ronald MacDonald",

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AU - Beine, Michel

AU - Bénassy-Quéré, Agnès

AU - MacDonald, Ronald

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N2 - We investigate the impact of official foreign exchange intervention on forecast heterogeneity, on the basis of a sample of forecasts made by a large number of commercial banks over two distinct periods, for the DEM (or EUR) and the JPY against the USD. We show that heterogeneity increases as a result of foreign exchange intervention. In the case of the DEM-EUR/USD market this increase is due to unexpected intervention, while for the JPY/USD it is due to expected intervention. Our results also emphasise the role of rumours, especially for the JPY/USD. In sum, official interventions are shown to move market opinions, albeit differently across the two markets. J. Japanese Int. Economies 21 (1) (2007) 38-63.

AB - We investigate the impact of official foreign exchange intervention on forecast heterogeneity, on the basis of a sample of forecasts made by a large number of commercial banks over two distinct periods, for the DEM (or EUR) and the JPY against the USD. We show that heterogeneity increases as a result of foreign exchange intervention. In the case of the DEM-EUR/USD market this increase is due to unexpected intervention, while for the JPY/USD it is due to expected intervention. Our results also emphasise the role of rumours, especially for the JPY/USD. In sum, official interventions are shown to move market opinions, albeit differently across the two markets. J. Japanese Int. Economies 21 (1) (2007) 38-63.

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KW - Foreign exchange markets

KW - Market micro-structure

KW - Survey expectations

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The impact of central bank intervention on exchange-rate forecast heterogeneity

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Keywords

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