ECB Foreign Exchange Intervention and the EURO: Institutional Framework, News, and Intervention

Byline: Rasmus Fatum (1), Michael M. Hutchison (2) Keywords: foreign exchange market intervention; Euro; central bank intervention Abstract: Using a unique intervention 'news' data set, this paper investigates the impact of ECB intervention and intervention-related news (newswire reports) on the Euro exchange rate. A time-series study of news generated by ECB officials and market participants regarding intervention and the value of the Euro as well as an event study of firm reports of ECB intervention is conducted. Both studies find significant short-run effects on the Euro value, while only 'negative' statements (official statements denying past intervention or ruling out future intervention) appear to have persistent effects. Author Affiliation: (1) Department of Marketing, Business Economics and Law, University of Alberta School of Business, Edmonton, Alberta, Canada, T6G 2R6 (2) Department of Economics, Social Sciences 1, University of California, Santa Cruz, CA, 95064, USA Article History: Registration Date: 04/10/2004