Exchange Rate Intervention, Market Efficiency and Asset Market Returns: The Greek Experience

Ôhis paper investigates the implications of exchange rate intervention on the forward market and on the asset returns in Greece during the ‘hard’ greek drachma period 1987-98, when the Central Bank of Greece frequently intervened. We examine the efficiency of the forward exchange market because Since the it influences the intervention effects on both the mean and the variance of the exchange rate.depends on the efficiency of the market we examine the efficiency of the forward exchange market In addition, by applying the causality in variance test between exchange rates and stock returns, this workwe examines the credibility of the signals provided by the Central Bank of Greece by applying the causality in variance test between exchange rates and stock returns.