Arbeitspapier
The coordination channel of foreign exchange intervention: a nonlinear microstructural analysis
The coordination channel has been proposed as a means by which foreign exchange market intervention may be effective, in addition to the traditional portfolio balance and signaling channels. If strong and persistent misalignments of the exchange rate are caused by non-fundamental influences, such that a return to equilibrium is hampered by a coordination failure among fundamentals-based traders, then central bank intervention may act as a coordinating signal, encouraging stabilizing speculators to re-enter the market at the same time. We develop this idea in the framework of a simple microstructural model of exchange rate movements, which we then estimate using daily data on the dollar-mark exchange rate and on Federal Reserve and Bundesbank intervention operations. The results are supportive of the existence of a coordination channel of intervention effectiveness.
- Language
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Englisch
- Bibliographic citation
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Series: Discussion Paper Series 1 ; No. 2006,08
- Classification
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Wirtschaft
Econometric and Statistical Methods and Methodology: General
Open Economy Macroeconomics
Foreign Exchange
- Subject
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foreign exchange intervention
coordination channel
market microstructure
nonlinear mean reversion
Wechselkurspolitik
Internationale wirtschaftspolitische Koordination
Devisenspekulation
Devisenmarkt
Mikrostrukturanalyse
Schätzung
Theorie
Deutschland
USA
- Event
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Geistige Schöpfung
- (who)
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Reitz, Stefan
Taylor, Mark P.
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
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2006
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Reitz, Stefan
- Taylor, Mark P.
- Deutsche Bundesbank
Time of origin
- 2006