A transaction level study of the effects of central bank intervention on exchange rates

We study the effects of sterilised intervention operations executed on behalf of the Swiss National Bank (SNB) using tick-by-tick transactions data between 1986 and 1995. We extend the preliminary analysis of Fischer and Zurlinden (1999) by matching these data with indicative intra-day exchange rate quotes and news-wire reports of central bank activity. Using an event study approach we find that intervention has important short-run effects on exchange rate returns. In particular, among various results, we find that i) intervention has a stronger impact when the SNB moves with-the-market and when its activity is concerted with that of other central banks and ii) exchange rate returns move in the 15 minute interval prior to interventions.

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