Is foreign exchange intervention effective? Some micro-analytical evidence from the Czech Republic

I estimate a two-equation system on the euro-Czech koruna exchange rate and order flow at hourly frequency within the framework of Evans-Lyons (JME 2002). I use transac-tions data from the Reuters Spot Matching market in the second half of 2002, during which the Czech National Bank conducted discreet interventions to stem the appreciation of the domestic currency. I find a significant impact of order flow on the exchange rate, equal on average to 7.6 basis points per �10 million, of which 80 percent persists through the day. The news of intervention increases the price impact of order flow by 3.9 basis points per �10 million, consistently with the notion of intervention efficacy. The order flow equation yields in-conclusive results.