We discuss some fundamental aspects of the study of foreign exchange intervention. In particular, we analyze some unresolved issues, such as the secrecy puzzle, the relevance of the signalling and portfolio-balance effect hypotheses, the identification of the impact of foreign exchange intervention on currency values. We argue that: i) the unresolved nature of these issues is partly due to the absence of a market microstructure perspective in most of the existing analysis of foreign exchange intervention; and ii) that recent promising advances in this strand of research have not fully exploited the potential of such perspective.
An Assessment of Some Open Issues in the Analysis of Foreign Exchange Intervention
VITALE, Paolo
2007-01-01
Abstract
We discuss some fundamental aspects of the study of foreign exchange intervention. In particular, we analyze some unresolved issues, such as the secrecy puzzle, the relevance of the signalling and portfolio-balance effect hypotheses, the identification of the impact of foreign exchange intervention on currency values. We argue that: i) the unresolved nature of these issues is partly due to the absence of a market microstructure perspective in most of the existing analysis of foreign exchange intervention; and ii) that recent promising advances in this strand of research have not fully exploited the potential of such perspective.File in questo prodotto:
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