The impact of central bank intervention on exchange-rate forecast heterogeneity |
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| Institution: | 1. University of Lille 2 (Cadre), France;2. Dulbea, University of Brussels, campus du Solbosch, avenue Franklin Roosevelt 50, B-1050 Brussels, Belgium;3. CEPII, 9 rue Georges Pitard, 75015 Paris, France;4. University of Glasgow, Department of Economics, Adam Smith Building, Glasgow G12 8RT, Scotland, UK |
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| Abstract: | We investigate the impact of official foreign exchange intervention on forecast heterogeneity, on the basis of 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 heterogeneity increases as a result of foreign exchange intervention. In the case of the DEM–EUR/USD market this increase is due to unexpected intervention, while for the JPY/USD it is due to expected intervention. Our results also emphasise the role of rumours, especially for the JPY/USD. In sum, official interventions are shown to move market opinions, albeit differently across the two markets. J. Japanese Int. Economies 21 (1) (2007) 38–63. |
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