The revival of a multilateral exchange rate system (ERS) with one single anchor currency and binding global rules for national exchange rate management is not a viable or realistic option. It is more realistic that the present 3-polar ERS in the medium term could dynamically enlarge to a 4-polar...

Studies of central bank intervention are complicated by the fact that we typically observe intervention only during periods of turbulent exchange markets. Furthermore, entering the market during these particular periods is a conscious "self-selectionʺ choice made by the intervening central...

This paper contributes to the microstructure approach to exchange rates in two ways. Using a unique dataset that covers 100% of the Brazilian FX financial market, we find a strict link between FX currency flows and the Balance of Payments. Second, we develop an identification strategy that...

In this paper we propose a generalisation of the noise trader transmission mechanism to examine the impact of central bank intervention on exchange rates. Within a heterogeneous expectations exchange rate model intervention operations are supposed to provide support to either chartist or...

While virtually all modern models of exchange rate crises recognise that the decision to abandon an exchange rate peg depends on how harshly policy makers are willing to defend the regime, they virtually never model how the exchange rate is defended. In this paper we incorporate both the...

Although the ERM II rules allow the Danish krone to fluctuate against the euro within an official target zone of 4.5%, most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model...

This paper investigates the intraday effects of unannounced foreign exchange intervention on bid-ask exchange rate spreads using official intraday intervention data provided by the Danish central bank. Our starting point is a simple theoretical model of the bid-ask spread which we use to...

This paper uses a microstructure approach to analyze the effectiveness of capital controls introduced in Brazil to counter an appreciation of the Real. Based on a rich data set from the Brazilian foreign exchange market, we estimate a reduced-form VAR to characterize the interaction of the...

Central banks actively engage in sterilized foreign exchange market intervention despite numerous empirical studies indicating that these operations do not systematically affect the exchange rate. Are these policies misguided and central bankers irrational? Or is evidence showing the...

This paper examines spillover and spillback effects of unconventional monetary policies conducted by the European Central Bank (ECB) and Swiss National Bank (SNB) on the exchange rate's distribution. The empirical setup examines the price response of EURCHF risk reversal to a change in ECB and...