تجزیه و تحلیل فنی و اثربخشی مداخله بانک مرکزی

Using daily data on foreign exchange interventions of both the Bundesbank and the Fed we provide further evidence that central banks earn profits with interventions and that technical trading rules are unusually profitable on days on which interventions take place. We argue that what lies at the root of these seemingly contradictory results is that (a) intervention profits and trading rule profitability are measured over different horizons and (b) after interventions, exchange rates tend to move contrary to central banks’ intentions in the short run, but in agreement with their intentions in the long run.

Technical analysis is a generic term covering a great variety of rules for taking investment decisions. What is common to all rules is that they condition on past prices. While there is a lot of evidence of technical analysis being used by financial market practitioners (e.g. Taylor and Allen, 1992), the question whether technical trading rules have any predictive power in financial markets is controversial (Malkiel, 1990). In recent years, however, evidence supporting the profitability of technical trading rules has been mounting (for review, see Neely, 1997). It has frequently been suggested that a source of the profitability of using technical trading rules on foreign exchange markets is government interference with free market forces through central bank interventions (Sweeney, 1986 and Levich and Thomas, 1993). In a recent study, LeBaron (1999) examines the relationship between interventions and trading rule profits and finds firstly, that Moving Average trading rules are remarkably efficient at predicting exchange rate changes on days when central banks intervene and secondly, that technical trading rule profitability is dramatically reduced if intervention days are removed from the sample. This is very suggestive of the fact that there exists a connection between central bank interventions and technical trading rule profitability. LeBaron examines whether there exists a common factor causing both interventions and trading rule profitability, but finds no indications of such a factor. LeBaron’s results support the suggestion that technical traders can gain at the expense of central banks. This, however, seems to stand in contrast to the results of Leahy (1995), who, also using daily intervention data, finds that the Fed made substantial profits with its interventions. In this paper we confirm LeBaron’s results and extend them by looking at a wider range of trading rules and by considering not only Fed but also Bundesbank intervention data. We also extend Leahy’s results by giving evidence that the Bundesbank made very large profits with its interventions, too. We argue that what lies at the root of these seemingly contradictory results is that trading rule returns and intervention profits are measured over different horizons. We examine the relationship between interventions and subsequent deviations from uncovered interest parity for varying horizons and find that while exchange rates (net of interest differentials) move in a manner that is inconsistent with the aim of the interventions in the short run, the opposite is true in the long run. Moreover, we show that trading rule profits in the first days after intervention episodes end are highly negative. The paper is organized as follows: after describing the data in Section 2, we confirm and extend LeBaron’s (1999) results in Section 3. Section 4 provides evidence that both Fed and Bundesbank made substantial profits with their interventions. In Section 5 we address the effectiveness of interventions and examine the behavior of exchange rates after interventions over time. Section 6 concludes.

In this paper we gave further evidence for central banks earning profits with their foreign exchange interventions. We also confirmed that Moving Average trading rules are highly profitable on days when central banks intervene, and showed that the trading rules tend to bet against central banks. This seeming contradiction turned out to be due to (a) intervention profits and trading rule profitability being measured over different horizons and (b) after interventions, exchange rates moving contrary to central banks’ intentions in the short run, but in agreement with their intentions in the long run. Moreover, we found that trading rule returns on days that neither coincide with nor are preceded by interventions are positive and are about as large as trading rule returns for the entire sample, which implies that even if interventions were a cause of trading rule profitability, they would not be the only one. It is worth noting that our results fit in well with Taylor and Allen’s (1992) study of the use of technical analysis in foreign exchange markets. About 90% of the respondents to their questionnaire survey use at least some chartist input at short horizons (intraday to one week), while at long horizons (one year or longer) 85% of respondents view fundamental analysis as more important than chart analysis. Our results suggest that at short horizons the respondents do well to take chartism into account. On the other hand, the fact that central banks make profits in the long run, suggests (if we assume that interventions are aimed at bringing exchange rates in line with fundamentals) that it is rational to base ones decisions on fundamental analysis in the long run. There is also an interesting connection between our results and those of studies of expectations’ formation on foreign exchange markets. Analyzing survey data on exchange rate expectations Frankel and Froot (1990) find that while short term (1-week–3-month) expectations exhibit bandwagon tendencies, in the long term market participants tend to forecast a return to a long-run equilibrium such as Purchasing Power Parity37. If, as suggested, we view interventions as being aimed at stopping trends away from fundamentals, our results concerning the short and long term relationship between interventions and subsequent deviations from uncovered interest parity suggest that this so-called expectational twist may simply be a sign of profit maximizing behavior. As regards the question of the effectiveness of interventions, the only conclusion one can draw is that they are not immediately successful. To what extent they contribute to the exchange rate trends turning earlier than they would otherwise have done is unclear. It is important to note, however, that our results are also compatible with central bank interventions having no influence at all on exchange rates (but simply exploit long term exchange rate misalignments). In the worst case it may even be that interventions are seen by technically inclined market participants as a confirmation of the existence of a strong trend38. In this case interventions might be counterproductive by attracting additional technical traders and thereby prolonging deviations of the exchange rate from its fundamental value. The question remains what connects central bank interventions and technical trading rule profitability. An alternative to the view that interventions are reponsible for trading profits would be that both interventions and technical trading rules are addressing the same phenomenon: large swings in flexible exchange rates, which cannot be explained (let alone predicted) on the basis of economic fundamentals. Technical trading rules might try to exploit (or even partially cause/prolong) them while central banks might try to reduce their amplitude. Given their different aims, they end up on opposite sides of trades. While this is just one interpretation that squares with the empirical regularities presented in this paper, a closer analysis of the effects technically motivated trading has on exchange rate dynamics seems warranted. A better understanding of what makes technical trading rules profitable may be essential to answering the question of the scope and limitations of central bank interventions.