Working Paper: CEPR ID: DP4529
Authors: Andreas M. Fischer
Abstract: Price clustering is a well-documented regularity of foreign exchange transactions. In this Paper, I present new empirical evidence of price clustering for central bank interventions. A feature of the price clustering in Swiss National Bank (SNB) transactions is market dependency. Evidence of clustering in the broker market is considerably smaller than in the dealer market. The empirical analysis for Swiss interventions uses a disaggregate approach to test the hypothesis whether intervention strategy matters. The most important determinants of price clustering are bank size and transaction volume. While the regression evidence for customer transactions is consistent with the efficiency hypothesis, the clustering results for intervention trades are not influenced by the SNB?s intervention tactics.
Keywords: central bank interventions; clustering; intervention strategy
JEL Codes: E31; E33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market Conditions (D49) | Price Clustering (D40) |
| Central Bank Interventions (E52) | Price Clustering (D40) |
| Transaction Volume (Y10) | Price Clustering (D40) |
| Bank Size (G21) | Price Clustering (D40) |
| Central Bank Intervention Tactics (E52) | Price Clustering (D40) |