Is central bank intervention effective in stabilizing exchange rates?

The key issue discussed in the paper is how the G-3 and EMS countries have conducted central bank intervention, and whether such intervention was coordinated, sterilized and effective. It is found that G-3 as well as EMS intervention was apparently sterilized, both in its immediate impact and in its long-run consequences. Second, intervention by the G-3 and EMS countries was ineffective in the sense that it did not significantly stabilize bilateral exchange rates in the long-run. It is argued that the predominant use of sterilized intervention, which represents the most ineffective means for stabilizing exchange rates, must be seen as the prime cause for the collapse of the narrow exchange rate bands of the EMS.