Patterns Of Foreign Exchange Intervention Under Inflation Targeting
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Patterns Of Foreign Exchange Intervention Under Inflation Targeting
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Author : Gustavo Adler
language : en
Publisher: International Monetary Fund
Release Date : 2020-05-29
Patterns Of Foreign Exchange Intervention Under Inflation Targeting 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 2020-05-29 with Business & Economics categories.
The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT). We find significant differences between advanced and emerging market economies, with the former group conducting FXI limitedly and broadly symmetrically, while the use of this policy instrument in emerging market countries is pervasive and mostly asymmetric (biased towards purchasing foreign currency, even after taking into account precautionary motives). Within emerging markets, the use of FXI is common both under IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while there is strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies where FXI is more pervasive.
Foreign Exchange Intervention A Dataset Of Public Data And Proxies
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Author : Gustavo Adler
language : en
Publisher: International Monetary Fund
Release Date : 2021-02-19
Foreign Exchange Intervention A Dataset Of Public Data And Proxies 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 2021-02-19 with Business & Economics categories.
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.
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.
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.
Shocks And Capital Flows
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Author : Mr. Gaston Gelos
language : en
Publisher: International Monetary Fund
Release Date : 2023-10-27
Shocks And Capital Flows written by Mr. Gaston Gelos 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 2023-10-27 with Business & Economics categories.
The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.
Evolving Monetary Policy Frameworks In Low Income And Other Developing Countries
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2015-10-23
Evolving Monetary Policy Frameworks In Low Income And Other Developing Countries written by International Monetary Fund 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 2015-10-23 with Business & Economics categories.
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
The Role Of The Exchange Rate In Inflation Targeting Emerging Economies
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Author : Anna Nordstrom
language : en
Publisher: International Monetary Fund
Release Date : 2009-11-24
The Role Of The Exchange Rate In Inflation Targeting Emerging Economies written by Anna Nordstrom 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 2009-11-24 with Business & Economics categories.
This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.
International Finance And Monetary Policy
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Author : Gleb P. Severov
language : en
Publisher: Nova Publishers
Release Date : 2006
International Finance And Monetary Policy written by Gleb P. Severov and has been published by Nova Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Business & Economics categories.
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect international trade. In a globalising world, the policies of various central banks and similar institutions impact large and small players alike. This book presents new and important research on issues of interest in international finance and monetary policy.
Towards Inflation Targeting In Sri Lanka
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Author : Rahul Anand
language : en
Publisher: International Monetary Fund
Release Date : 2011-04-01
Towards Inflation Targeting In Sri Lanka written by Rahul Anand 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 2011-04-01 with Business & Economics categories.
This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime.
Foreign Exchange Intervention As A Monetary Policy Instrument
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Author : Felix Hüfner
language : en
Publisher: Springer Science & Business Media
Release Date : 2012-12-06
Foreign Exchange Intervention As A Monetary Policy Instrument written by Felix Hüfner and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-12-06 with Business & Economics categories.
Foreign exchange intervention is frequently being used by central banks in countries which have a floating exchange rate. Most theoretical monetary policy models, however, do not take this phenomenon into account. This book contributes to close this gap between theory and practice by interpreting foreign exchange intervention as an additional monetary policy instrument for inflation targeting central banks. In-depth empirical analyses of the foreign exchange operations and interest rate policy of five inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom) demonstrate how foreign exchange intervention is used in practice.