Student Faculty Macro Lunch - "Blowing against the Wind? A Narrative Approach to Central Bank Foreign Exchange Intervention"
Presentation | October 22 | 12-1 p.m. | 597 Evans Hall
Abstract: Studies on the effectiveness of central bank intervention yield mixed results and poorly deal with endogeneity. By using a narrative approach, this paper is the first to deal with intraday changes in market conditions to show the real effect of central bank foreign exchange intervention on exchange rates. Some studies find that intervention works in up to 80% of cases. However, by accounting for intraday market moving news, I find that in adverse conditions, the Bank of England only managed to influence the exchange rate in 8% of cases. I use both machine learning and human assessment to confirm the validity of the narrative assessment.
RSVP by October 18.