How Successful are Exchange Rate Communication and Interventions? Evidence from Time-Series and Event-Study Approaches

The paper analyses whether communication and actual interventions in FX markets are successful in moving exchange rates over the medium- to long-run. It compares empirical evidence based on time-series analysis with that obtained from an event-study approach. Both the time-series approach based on option contracts and the event-study methodology yield compelling evidence that communication and actual interventions tend to be successful in moving exchange rates in the desired direction contemporaneously as well as over the medium- to long-term. This finding is consistent with recent work on microstructure models that emphasises the importance of dynamic effects of news and fundamentals on exchange rates