Daily effects of foreign exchange intervention: Evidence from official Bank of Canada data

This paper analyzes the effects of official, daily Bank of Canada intervention in the CAD/USD exchange rate over the 1995–1998 period. Using an event study methodology and different criteria for effectiveness, some evidence that intervention was systematically associated with both a change in the direction and a smoothing of the exchange rate is presented. The results of the analysis, however, do not suggest that Bank of Canada intervention succeeded in reducing the volatility of the CAD/USD exchange rate. Furthermore, the paper shows that the effects of intervention are weakened when adjusting for general currency co-movements against the USD.