More on the Differences between Reported and Actual U.S. Central Bank Foreign Exchange Intervention

It is unclear whether the distinction between U.S. foreign exchange intervention and newspaper reports of such activity is important. Dominguez and Frankel (1993) argue that unreported intervention has a weaker impact on the market. In this paper, we ask the empirical question: If intervention is reported (was actual), does it matter whether it occurred (was reported)? For a subsample for both the yen-to-dollar and Deutschemark-to-dollar exchange rates, we reject the hypothesis that the impact of intervention on the variance does not depend on whether it was reported. We also find that the sign of the impact depends on whether the intervention was reported. In addition, we uncover some evidence for impacts of false reports of intervention. We suggest that remaining concerns about these distinctions should be focused on the market microstructure surrounding the actual intervention operations.