The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland, the Board of Governors of the Federal Reserve System, or the Bank for International Settlements. We would like to thank participants in the conference 'Exchange Rate Intervention: Theory and Experience' held at Cambridge University under the auspices of The Centre for International Macroeconomics and Finance (CIMF), especially our discussant Michel Beine, organizers Christopher J. Neely and Mark P. Taylor and two anonymous referees.