Impact of Central Bank Intervention on Exchange-Rate Forecast Heterogeneity
CEPII Working Paper Series No. 02-05
45 Pages Posted: 10 Nov 2013
Date Written: April 5, 2002
Abstract
We investigate the impact of central bank intervention in the foreign exchange market on forecast heterogeneity. Market heterogeneity is based on a sample of forecasts made by a large number of commercial banks over two distinct periods for the DEM (or EUR) and the JPY against the USD. We show that, in general, forecast heterogeneity increases as a result of interventions, whether the interventions are unexpected (DEM-EUR) or expected (JPY). Our results also emphasise the role of rumours, especially in the YEN-USD market. In sum, official interventions are shown to move market opinions, albeit differently across the two markets.
Keywords: Central Bank Intervention; Foreign Exchange Markets; Survey Expectations; Market Micro-Structure
JEL Classification: F31, C42
Suggested Citation: Suggested Citation
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