The effectiveness of central bank intervention: A survey of the literature after 1982

Stabilizing the financial markets through communication and informed trading

“…Second, a Kyle model with a stylized government who trading on its target and fundamental signals has a regular solution structure and lays a good foundation for discussions on information disclosure. Third, it is in accord with the literature (e.g., Edison, 1993;Vitale, 1999;Sarno and Taylor, 2001;Neely, 2005;Engel, 2014;Pasquariello, 2017;and Pasquariello et al, 2020). The measure for price volatility, var (p), does not possess the above merits all at once, even though it is closely related to the measure for price stability, E (p pT ) 2 .…”

Stabilizing the Financial Markets Through Informed Trading

“…The SOC is 2 2 T + 2 T > 0, which holds accordingly if T > 0 holds. Comparing the above FOC of the government with the conjectured trading strategy of the government (12), we have…”

“…Our model discusses this debate by addressing the following 1 Shirai (2018aShirai ( , 2018b, Barbon and Gianinazzi (2019), and Charoenwong et al (2021) review the stock purchases through exhange-traded funds (ETF) conducted by the Bank of Japan. 2 The literature identi…es several recurring features of direct government intervention in …nancial markets (e.g., Edison, 1993;Vitale, 1999;Sarno and Taylor, 2001;Neely, 2005;Engel, 2014;Pasquariello (2017); Pasquariello, Roush and Vega, 2020): (1) governments tend to pursue nonpublic price targets in those markets; (2) governments often intervene in secret in the targeted markets; (3) governments are likely to have an information advantage over most market participants about the fundamentals of the traded assets; (4) the observed ex post e¤ectiveness of government intervention is often attibuted to that information advantage; (5) those price targets may be related to governments' fundamental information; (6) governments are sensitive to the potential costs of their interventions.…”

Is Central Bank Intervention Effective Under Inflation Targeting Regimes? The Case of Colombia

“…30 Edison (1993) and Almekinders (1995) survey empirical work on the determinants of intervention. 31 The nominal exchange rate data is provided by the BdR and corresponds to the value-weighted average of all foreign exchange rate transactions in the spot market throughout the day (officially known as TRM, or Tasa Representativa de Mercado).…”

“…On the other hand, in the case of a defense of the value of the domestic currency, the cumulative amount of intervention is constrained by the stock of available reserves.8 SeeHolub (2004) for a very similar policy implication based on the experience of the Czech Republic with central bank intervention. 9Edison (1993) surveys the literature on central bank intervention from the 1980s through early 1990s;Sarno and Taylor (2001) provide a more recent survey of theory and empirical evidence.10 Dominguez and Frankel (1993) andDominguez (2003) provide empirical evidence in this regard. For Japan,Ito (2002) found that large and infrequent intervention had quantitatively small but statistically significant effects on the dollar-yen nominal exchange rate.…”