Universitat Rovira i Virgili
Universitat Rovira i Virgili. Departament d'Economia
2008
In this article we develop a theoretical microstructure model of coordinated central bank intervention based on asymmetric information. We study the economic implications of coordination on some measures of market quality and show that the model predicts higher volatility and more significant exchange rate changes when central banks coordinate compared to when they intervene unilaterally. Both these predictions are in line with empirical evidence. Keywords: coordinated foreign exchange intervention, market microstructure. JEL Classification: D82, E58, F31, G14
Working document
English
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Documents de treball del Departament d'Economia; 2008-03
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