How Powerful is Unannounced, Sterilized Foreign Exchange Intervention?
26 Pages Posted: 29 Jul 2020 Last revised: 22 Feb 2021
Date Written: July 28, 2020
Though most central banks actively intervene on the foreign exchange market, the literature offers mixed evidence on their effectiveness: particularly for unannounced interventions. We use new, declassified data from the archives of the Bank of England and the institutional features of the Bretton Woods era to estimate the effects of intervention on the exchange rate. We find that a purchase of pounds equivalent to 1% of the money supply causes a statistically significant, 4-5 basis point appreciation in the pound.
Keywords: Monetary Policy, Foreign Exchange Markets, Bretton Woods System
JEL Classification: F3, N2
Suggested Citation: Suggested Citation