Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170736
Authors: 
Menkhoff, Lukas
Stöhr, Tobias
Year of Publication: 
2017
Citation: 
[Journal:] DIW Economic Bulletin [ISSN:] 2192-7219 [Volume:] 7 [Year:] 2017 [Issue:] 43 [Pages:] 445-451
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 decision makers also communicate their interventions or changes to exchange rate policies, the effects of these are likely to be stronger. Central bankers should therefore complement their interventions with communication to improve their likelihood of success.
Subjects: 
foreign exchange intervention
exchange rate regimes
actual interventions
communication
JEL: 
F31
F33
E58
Document Type: 
Article

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