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Title: A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates

Author(s): Richard Payne and Paolo Vitale

Publication Date: November 2001

Keyword(s): foreign exchange market, market microstructure and sterilized intervention

Programme Area(s): International Macroeconomics

Abstract: We study the effects of sterilized intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transaction data between 1985-95.We extend preliminary analysis conducted by Fischer and Zurlinden (1999) by matching these data with intra-day indicative exchange ate quotes and with news-wire reports of central banks ?activity. Via an event study analysis we find that intervention has important short-run effects on exchange ate returns and volatility. In particular, among various results, we find that intervention i) has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks, ii) is partially anticipated by the market and iii) temporarily reduces market liquidity.

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Bibliographic Reference

Payne, R and Vitale, P. 2001. 'A Transaction Level Study of the Effects of Central Bank Intervention of Exchange Rates'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3085