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Journal of Economic Literature: Vol. 39 No. 3 (September 2001)
JEL Volume. 39, Issue 3 | 
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JEL Indexes (Members Only)Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?
Article Citation
Sarno, Lucio, and
Mark P. Taylor. 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?."
Journal of Economic Literature,
39(3): 839-868.
DOI: 10.1257/jel.39.3.839
DOI: 10.1257/jel.39.3.839
Abstract
Our paper assesses progress made by the profession in understanding whether and how exchange rate intervention works. We review theory and evidence on official intervention, concentrating primarily on work published in the last decade or so. We conclude that, unlike the profession's consensus of the 1980s, official intervention can be effective, especially as a signal of policy intentions and when publicly announced and concerted. We note an apparent empirical puzzle concerning the secrecy of much intervention and suggest another way for intervention to be effective which has received little attention in the literature, namely by remedying a coordination failure in the foreign exchange market.
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Authors
Sarno, Lucio (U Warwick, CEPR, and Federal Reserve Bank of St Louis)
Taylor, Mark P. (U Warwick, CEPR, and World Bank)
Taylor, Mark P. (U Warwick, CEPR, and World Bank)
JEL Classifications
F31: Foreign Exchange
