Finance Papers

Document Type

Journal Article

Date of this Version

4-1995

Publication Source

Journal of Business

Volume

68

Issue

2

Start Page

185

Last Page

214

Abstract

The relationship between foreign exchange intervention and monetary policy underlies the question of whether sterilized interventions can affect the exchange rate. In this article, I examine this relationship using data on U.S. foreign exchange interventions from 1985 to 1990, recently made publicly available. I examine whether interventions could be viewed as "signaling" changes in future monetary policy variables. I also consider whether changes in monetary policy may induce interventions in an effort by central bankers to " lean against the wind" of exchange rate movements. Interestingly, I find evidence both that interventions help predict monetary policy variables and that monetary variables help predict interventions.

Copyright/Permission Statement

© 1995 by University of Chicago Press

Embargo Date

1996

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Date Posted: 27 November 2017

This document has been peer reviewed.