The Accuracy of Reports of Foreign Exchange Intervention / Michael W. Klein.

By:

Klein, Michael W

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4165.Publication details: Cambridge, Mass. National Bureau of Economic Research 1992.Description: 1 online resource: illustrations (black and white)Subject(s):

F31 - Foreign Exchange

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Abstract: Daily foreign exchange operations by the Federal Reserve are not revealed to the public contemporaneously or, up until recently, even years after the fact. With the recent release of daily intervention data it is now possible to gauge the accuracy of the market's perceptions of the Fed's foreign exchange intervention. In this paper we look at both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the Federal Reserve between the beginning of January 1985 and the end of December 1989. The evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 percent and that the likelihood of intervention actually occurring given that it was reported was 88 percent. Interventions which were reported by the newspaper were larger on average than those which were not reported and this difference is statistically significant. Multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention.

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Previous	nber w4162 Microeconomic Rigidities and Aggregate Price Dynamics /	nber w4163 Conspicuous Consumption, Pure Profits, and the Luxury Tax /	nber w4164 Economic Foundations of Cost Effective Analysis /	nber w4165 The Accuracy of Reports of Foreign Exchange Intervention /	nber w4166 Greenback Resumption and Silver Risk: The Economics and Politics of Monetary Regime Change in the United States, 1862-1900 /	nber w4167 Determinants of Shrt-Term Real Interest Differentials Between Japan and the United States /	nber w4168 Relative-Price Changes as Aggregate Supply Shocks /	Next

September 1992.

Daily foreign exchange operations by the Federal Reserve are not revealed to the public contemporaneously or, up until recently, even years after the fact. With the recent release of daily intervention data it is now possible to gauge the accuracy of the market's perceptions of the Fed's foreign exchange intervention. In this paper we look at both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the Federal Reserve between the beginning of January 1985 and the end of December 1989. The evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 percent and that the likelihood of intervention actually occurring given that it was reported was 88 percent. Interventions which were reported by the newspaper were larger on average than those which were not reported and this difference is statistically significant. Multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention.