Macroeconomic Impact Of Foreign Exchange Intervention Some Cross Country Empirical Findings
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Macroeconomic Impact Of Foreign Exchange Intervention Some Cross Country Empirical Findings
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Author : Mr. Zhongxia Jin
language : en
Publisher: International Monetary Fund
Release Date : 2021-04-30
Macroeconomic Impact Of Foreign Exchange Intervention Some Cross Country Empirical Findings written by Mr. Zhongxia Jin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-04-30 with Business & Economics categories.
Based on VAR analyses across 26 countries, we show that, although foreign exchange intervention (FXI) is effective in stabilizing the nominal exchange rate in the short run, its impacts on the real exchange rate are less significant: Limitations on nominal exchange rate flexibility may induce adjustments to the real exchange rate through domestic prices. We find that countries that intervene more heavily in response to external shocks experience greater general and asset price volatility, which is not conducive to countering the impact of external shocks. We show that China’s macroeconomic responses to external shocks are broadly consistent with international experiences among intervening countries. The simple methodological framework adopted in this paper is meant to examine a broad set of macroeconomic variables and bears limitations; our findings serve to motivate more structural analysis on FXI’s macroeconomic impacts going forward.
Unveiling The Effects Of Foreign Exchange Intervention
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Author : Gustavo Adler
language : en
Publisher: International Monetary Fund
Release Date : 2015-06-23
Unveiling The Effects Of Foreign Exchange Intervention written by Gustavo Adler and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-06-23 with Business & Economics categories.
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.
Exchange Rate Swings And Foreign Currency Intervention
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Author : Andrew Filardo
language : en
Publisher: International Monetary Fund
Release Date : 2022-07-29
Exchange Rate Swings And Foreign Currency Intervention written by Andrew Filardo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-07-29 with Business & Economics categories.
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.
The Empirics Of Foreign Exchange Intervention In Emerging Markets
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Author : Roberto Pereira Guimarães
language : en
Publisher: International Monetary Fund
Release Date : 2004-07-01
The Empirics Of Foreign Exchange Intervention In Emerging Markets written by Roberto Pereira Guimarães and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-07-01 with Business & Economics categories.
This paper analyzes the effects of intervention on the level and volatility of the exchange rate in Mexico and Turkey, two emerging countries that have floating exchange rate regimes. The paper finds mixed evidence on the effectiveness of intervention. In Mexico, foreign exchange sales have a small impact on the exchange rate level and raise short-term volatility, while in Turkey, intervention does not appear to affect the exchange rate level but reduces its shortterm volatility. In both cases, the findings are consistent with officially stated policy objectives, which aim to minimize the effect of intervention on the exchange rate, but cast doubt on claims that intervention is a useful tool for smoothing volatility. Although these findings cannot be generalized to other emerging markets, intervention's apparently limited effectiveness highlights the need for central banks to use their scarce foreign reserves selectively and parsimoniously.
Foreign Exchange Intervention In Developing And Transition Economies
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Author : Mr.Jorge Iván Canales Kriljenko
language : en
Publisher: International Monetary Fund
Release Date : 2003-05-01
Foreign Exchange Intervention In Developing And Transition Economies written by Mr.Jorge Iván Canales Kriljenko and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-05-01 with Business & Economics categories.
Based on evidence obtained from the IMF's 2001 Survey on Foreign Exchange Market Organization, the author argues that, for several reasons, some central banks in developing and transition economies may be able to conduct foreign exchange intervention more effectively than the central banks of developed countries issuing the major international currencies. First, these central banks do not always fully sterilize their foreign exchange interventions. In addition, they issue regulations and conduct their foreign exchange operations in a way that increases the central bank's information advantage and the size of their foreign exchange intervention relative to foreign exchange market turnover. Some of the central banks also use moral suasion to support their foreign exchange interventions.
The Cost Of Foreign Exchange Intervention
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Author : Gustavo Adler
language : en
Publisher: International Monetary Fund
Release Date : 2016-04-12
The Cost Of Foreign Exchange Intervention written by Gustavo Adler and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-04-12 with Business & Economics categories.
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.
The Effectiveness Of Foreign Exchange Intervention In Emerging Market Countries
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Author : Piti Disyatat
language : en
Publisher:
Release Date : 2005
The Effectiveness Of Foreign Exchange Intervention In Emerging Market Countries written by Piti Disyatat and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Banks and banking, Central categories.
We survey the literature on the efficacy of foreign exchange market intervention in emerging market countries, emphasising the differences with the literature on industrial countries. We then use official statistics on central bank intervention by the Czech National Bank in conjunction with options market data, to study the impact of intervention during 2001-02. We find that central bank intervention had some (weakly) statistically significant impact on the spot rate and the risk reversal but that this impact was small. We do not find evidence that intervention had an influence on short-term exchange rate volatility. We also find that, in our sample period, Czech authorities appeared to intervene mainly in response to an acceleration of the speed of koruna appreciation.
Market Volatility And Foreign Exchange Intervention In Emes
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Author : Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico
language : es
Publisher:
Release Date : 2013
Market Volatility And Foreign Exchange Intervention In Emes written by Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Banks and banking, Central categories.
Foreign Exchange Intervention Rules For Central Banks A Risk Based Framework
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Author : Romain Lafarguette
language : en
Publisher: International Monetary Fund
Release Date : 2021-02-12
Foreign Exchange Intervention Rules For Central Banks A Risk Based Framework written by Romain Lafarguette and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-02-12 with Business & Economics categories.
This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Inflation Targeting And Exchange Rate Management In Less Developed Countries
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Author : Mr. Marco Airaudo
language : en
Publisher: International Monetary Fund
Release Date : 2016-03-08
Inflation Targeting And Exchange Rate Management In Less Developed Countries written by Mr. Marco Airaudo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-03-08 with Business & Economics categories.
We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.