New Economics Papers
on Market Microstructure
Issue of 2008‒08‒14
one paper chosen by
Thanos Verousis

  1. Conditional Efficacy of Sterilized Intervention By Jun, Jongbyung

  1. By: Jun, Jongbyung (Suffolk University, Department of Economics)
    Abstract: The noise-trading or coordination channel hypothesis implies that sterilized intervention in the foreign exchange market is effective if certain conditions are satisfied, but ineffective otherwise. The hypothesis is tested with a three-regime threshold model and daily data on actual intervention by US and German central banks. The main finding is that if central banks choose the optimal timing in light of the trend-chasing behaviors of noise traders, such strategic intervention is effective in moving the exchange rate in the desired direction.
    Keywords: Central bank intervention; Threshold model; Coordination channel
    JEL: C22 E58 F31
    Date: 2008–01–15

This issue is ©2008 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.