Foreign Exchange Intervention: A Shield Against Appreciation Winds?

International Monetary Fund
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This paper examines foreign exchange intervention practices and their effectiveness using a new qualitative and quantitative database for a panel of 15 economies covering 2004 - 10, with special focus on Latin America. Qualitatively, it examines institutional aspects such as declared motives, instruments employed, the use of rules versus discretion, and the degree of transparency. Quantitatively, it assesses the effectiveness of sterilized interventions in influencing the exchange rate using a two-stage IV-panel data approach to overcome endogeneity bias. Results suggest that interventions slow the pace of appreciation, but the effects decrease rapidly with the degree of capital account openness. At the same time, interventions are more effective in the context of already ?overvalued'' exchange rates.
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Additional Information

Publisher
International Monetary Fund
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Published on
Jul 1, 2011
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Pages
29
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ISBN
9781462318346
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Language
English
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Genres
Business & Economics / Economics / General
Business & Economics / Economics / Macroeconomics
Business & Economics / International / Economics
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Content Protection
This content is DRM protected.
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