The intraday effects of central bank intervention on exchange rate spreads
Research output: Contribution to journal › Journal article › peer-review
Documents
- FatumPedersenSorensenJune2012
Submitted manuscript, 299 KB, PDF document
We investigate the intraday effects of intra-marginal intervention in a horizontal band on the exchange rate spread. Official intraday data on Danish intervention transactions in the ERM II, the Exchange Rate Mechanism of the European Union, facilitates our analysis. We show that intervention purchases and sales both exert a significant influence on the exchange rate spread, but in opposite directions. Intervention purchases of the small currency, on average, narrow the spread while intervention sales of the small currency, on average, widen the spread. This is a novel finding that differs from those of existing studies that find intervention always widens the exchange rate spread and increases market uncertainty
Translated title of the contribution | Intradagseffekterne af centralbanksintervention på valutakursspænd |
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Original language | English |
Journal | Journal of International Money and Finance |
Volume | 33 |
Pages (from-to) | 103-117 |
ISSN | 0261-5606 |
DOIs | |
Publication status | Published - Mar 2013 |
Bibliographical note
JEL classifications: E58; F31; G15
- Foreign exchange intervention, ERM II, Exchange rate spreads, Intraday data
Research areas
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ID: 97142021