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Dirty float or clean intervention? The Bank of England in the foreign exchange market

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  • Naef, Alain

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 study of the Bank of England’s foreign exchange intervention between 1952 and 1972. The main finding is that the Bank of England 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.

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  • Naef, Alain, 2020. "Dirty float or clean intervention? The Bank of England in the foreign exchange market," SocArXiv p4tbm_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:p4tbm_v1
    DOI: 10.31219/osf.io/p4tbm_v1
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