Year: 2020
Type: article
Abstract: The effectiveness of central bank intervention is debated and despite literature showing mixed results, central banks regularly intervene in the foreign exchange market, both in developing and developed economies. Does foreign exchange intervention work? Using over 60,000 new daily observations on intervention and exchange rates, this paper is the first to study the Bank of England's foreign exchange intervention between 1952 and 1972. The main finding is that the Bank was unsuccessful in managing a credible exchange rate over that period. Running an event study, I demonstrate that betting systematically against the Bank of England would have been a profitable trading strategy. Pressures increased in the 1960s and the Bank eventually manipulated the publication of its reserve figures to avoid a run on sterling.
DOI: 10.1093/ereh/heaa011
Author: Alain Naef
Institution: University of California, Berkeley
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2946444736