[PDF] Foreign Exchange Intervention A New Database eBook

Author : Gustavo Adler
Publisher : International Monetary Fund
Page : 67 pages
File Size : 45,51 MB
Release : 2021-02-19
Category : Business & Economics
ISBN : 1513566679

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Foreign exchange intervention (FXI) is a highly debated topic. Yet, comprehensive and comparable data on FXI is hard to find. This paper provides a new dataset of FXI covering a large number of countries over the period 2000-20 at monthly and quarterly frequencies. It includes publicly available data for about 40 countries and carefully constructed proxies for 122 countries. Proxies are focused on both spot and derivative transactions that alter the central bank’s foreign currency position and account for a wide range of central bank operations, including vis-à-vis residents, the first proxy to do so to our knowledge. The paper discusses the merits of the new proxy relative to coarser measures traditionally used like the change in reserves, and potential definitional differences with published data. The paper also presents stylized facts using our newly constructed FXI proxies.

Author : Gustavo Adler
Publisher : International Monetary Fund
Page : 30 pages
File Size : 32,14 MB
Release : 2011-07-01
Category : Business & Economics
ISBN : 1462301215

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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.

Author : Kathryn M. Dominguez
Publisher : Peterson Institute for International Economics
Page : 196 pages
File Size : 43,6 MB
Release : 1993
Category : Business & Economics
ISBN :

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How much impact on exchange rates do central banks have when they buy and sell currencies? According to many analysts, such intervention has no independent impact. This book challenges the conventional wisdom, demonstrating that such intervention can be an effective and extremely important tool for policymakers. Using previously unavailable daily intervention data from the US Federal Reserve and German Bundesbank, the authors show that even "sterilized" intervention -intervention that entails no corresponding changes in monetary policy- has a significant effect. A key element is whether the intervention is known to the public: widespread market awareness of the activity adds substantially to its payoff. Authors Dominguez and Frankel draw implications for intervention policy and its role in international economic policy coordination.

Author : Gustavo Adler
Publisher : International Monetary Fund
Page : 42 pages
File Size : 10,51 MB
Release : 2015-06-23
Category : Business & Economics
ISBN : 1513514865

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We study the effect of foreign exchange intervention on the exchange rate relying on an instrumental-variables panel approach. We find robust evidence that intervention affects the level of the exchange rate in an economically meaningful way. A purchase of foreign currency of 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates in the ranges of [1.7-2.0] percent and [1.4-1.7] percent respectively. The effects are found to be quite persistent. The paper also explores possible asymmetric effects, and whether effectiveness depends on the depth of domestic financial markets.

Author : Gustavo Adler
Publisher : International Monetary Fund
Page : 40 pages
File Size : 27,83 MB
Release : 2016-03-23
Category : Business & Economics
ISBN : 1475547234

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We study the use of foreign exchange (FX) intervention as an additional policy instrument in an environment with learning, where agents infer the central bank policy rules from its policy actions. Under full information, a central bank focused on stabilizing output and inflation can achieve better outcomes by using FX intervention as an additional policy tool. Under policy uncertainty, where agents perceive that monetary policy may also have exchange rate stabilization goals, the use of FX intervention entails a trade-off, reducing output volatility while increasing inflation volatility. While having an additional policy tool is always beneficial, we find that the optimal magnitude of intervention is higher in monetary policy regimes with lower uncertainty. These results indicate that the benefits of using FX intervention as an additional stabilization tool are greater in regimes where monetary policy is credibly focused on output and inflation stabilization.

Author : Andrew Filardo
Publisher : International Monetary Fund
Page : 41 pages
File Size : 49,12 MB
Release : 2022-07-29
Category : Business & Economics
ISBN :

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This paper develops a new approach for exploring the effectiveness of foreign currency intervention, focusing on real exchange cycles. Using band spectrum regression methods, it examines the role of macroeconomic fundamentals in determining the equilibrium real exchange rate at short-, medium-, and low frequencies. Next, it assesses the effectiveness of FX intervention depending on the degree of cycle-specific misalignments for 26 advanced- and emerging market economies, covering the period 1990–2018, and using different techniques to mitigate endogeneity concerns. Evidence supports the hypothesis that central banks can lean effectively against short-run cyclical misalignments of the real exchange rate. The effects are present in quarterly data—i.e., at policy-relevant horizons. The effectiveness of intervention rises with the size of the misalignment, and with the duration of one-sided interventions. FX sales appear to be somewhat more effective than FX purchases, and intervention is less effective in more liquid FX markets.

Author : Mr.Jorge Iván Canales Kriljenko
Publisher : International Monetary Fund
Page : 58 pages
File Size : 21,55 MB
Release : 2006-03-02
Category : Business & Economics
ISBN : 9781589064218

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Despite increasing exchange rate flexibility, central banks in emerging markets still intervene in their foreign exchange markets for several reasons. In doing so, they face many operational questions, including on the degree of transparency and the choice of markets and counterparties. This paper identifies elements of best practice in official foreign exchange intervention, presents survey evidence on intervention practices in developing countries, and assesses the effectiveness of intervention in Mexico and Turkey.

Author : Sylvester C. W. Eijffinger
Publisher : Edward Elgar Publishing
Page : 616 pages
File Size : 19,73 MB
Release : 1998
Category : Banks and banking, Central
ISBN :

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Brings together articles first published in various journals from the 1970s through the 1990s, in sections on the objectives of foreign exchange intervention, the effectiveness of foreign exchange intervention and the portfolio-balance and expectations channel, and new approaches to foreign exchange intervention involving technical analysis, private information, and game-theoretic models. Specific topics include exchange rate policy in Japan, the effects of sterilized intervention, market responses to coordinated central bank intervention, and the London foreign exchange market. Annotation copyrighted by Book News, Inc., Portland, OR

Author : Gustavo Adler
Publisher : International Monetary Fund
Page : 37 pages
File Size : 41,97 MB
Release : 2016-04-12
Category : Business & Economics
ISBN : 148433230X

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The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.