This paper empirically investigates the main determinants of secret interventions in the foreign exchange (FX) market. Using the recent experience of the Bank of Japan, we estimate a model that explains the share of secret to reported interventions in the FX market. Two sets of determinants are clearly identified: the first is related to the probability of detection of the central bank orders by market participants; the second to the central bank's internal decision to opt for secrecy. Our estimations support the arguments of current microstructure theories that rationalize the use of secret interventions.
|Number of pages||16|
|Journal||Journal of International Financial Markets, Institutions and Money|
|Publication status||Published - Jul 2007|
- Central bank interventions
- Exchange rates market
- Secrecy puzzle