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Foreign Exchange Intervention
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Book Synopsis Foreign Exchange Intervention as a Monetary Policy Instrument by : Felix Hüfner
Download or read book Foreign Exchange Intervention as a Monetary Policy Instrument written by Felix Hüfner and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Author :Kathryn M. Dominguez Publisher :Peterson Institute for International Economics ISBN 13 : Total Pages :196 pages Book Rating :4.:/5 (318 download)
Book Synopsis Does Foreign Exchange Intervention Work? by : Kathryn M. Dominguez
Download or read book Does Foreign Exchange Intervention Work? written by Kathryn M. Dominguez and published by Peterson Institute for International Economics. This book was released on 1993 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Cost of Foreign Exchange Intervention by : Gustavo Adler
Download or read book The Cost of Foreign Exchange Intervention written by Gustavo Adler and published by International Monetary Fund. This book was released on 2016-04-12 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Does Foreign Exchange Intervention Work? by : Kathryn M. Dominguez
Download or read book Does Foreign Exchange Intervention Work? written by Kathryn M. Dominguez and published by Peterson Institute for International Economics. This book was released on 1993 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Foreign Exchange Intervention by : Gustavo Adler
Download or read book Foreign Exchange Intervention written by Gustavo Adler and published by International Monetary Fund. This book was released on 2011-07-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Official Intervention in the Foreign Exchange Market by : Roberto Pereira Guimarães
Download or read book Official Intervention in the Foreign Exchange Market written by Roberto Pereira Guimarães and published by International Monetary Fund. This book was released on 2003-07-01 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers guidance on the operational aspects of official intervention in the foreign exchange market, particularly in developing countries with flexible exchange rate regimes. A brief survey of the literature and country experience is followed by an analysis of the objectives, timing, amount, degree of transparency, and choice of markets and counterparties in conducting intervention. The analysis highlights the difficulty of detecting exchange rate misalignments and disorderly markets, and argues in favor of parsimony in official intervention. Determining the timing and amount of intervention is a highly subjective excercise, and some degree of discretion is almost necessary, though policy rules may serve as "rules of thumb."
Book Synopsis Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework by : Romain Lafarguette
Download or read book Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework written by Romain Lafarguette and published by International Monetary Fund. This book was released on 2021-02-12 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Official Foreign Exchange Intervention by : Mr.Jorge Iván Canales Kriljenko
Download or read book Official Foreign Exchange Intervention written by Mr.Jorge Iván Canales Kriljenko and published by International Monetary Fund. This book was released on 2006-03-02 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Strained Relations by : Michael D. Bordo
Download or read book Strained Relations written by Michael D. Bordo and published by University of Chicago Press. This book was released on 2015-03-02 with total page 453 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the twentieth century, foreign-exchange intervention was sometimes used in an attempt to solve the fundamental trilemma of international finance, which holds that countries cannot simultaneously pursue independent monetary policies, stabilize their exchange rates, and benefit from free cross-border financial flows. Drawing on a trove of previously confidential data, Strained Relations reveals the evolution of US policy regarding currency market intervention, and its interaction with monetary policy. The authors consider how foreign-exchange intervention was affected by changing economic and institutional circumstances—most notably the abandonment of the international gold standard—and how political and bureaucratic factors affected this aspect of public policy.
Book Synopsis Managing the Tide by : Mr.Atish R. Ghosh
Download or read book Managing the Tide written by Mr.Atish R. Ghosh and published by International Monetary Fund. This book was released on 2017-03-27 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether—and how—emerging market economies (EMEs) respond to capital flows to mitigate their untoward consequences. Based on a sample of about 50 EMEs over 2005Q1–2013Q4, we find that EME policy makers respond proactively to capital inflows by using a combination of policy tools: central banks raise the policy interest rate to address economic overheating concerns; intervene in the foreign exchange market to resist currency appreciation pressures; tighten macroprudential measures to dampen credit growth; and deploy capital inflow controls in the face of competitiveness and financial-stability concerns. Contrary to conventional policy advice to EMEs, we find no evidence of counter-cyclical fiscal policy in the face of capital inflows. Overall, policies are more likely to respond, and used in combination, during inflow surges than in more normal times.
Book Synopsis Unveiling the Effects of Foreign Exchange Intervention by : Gustavo Adler
Download or read book Unveiling the Effects of Foreign Exchange Intervention written by Gustavo Adler and published by International Monetary Fund. This book was released on 2015-06-23 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Foreign Exchange Intervention under Policy Uncertainty by : Gustavo Adler
Download or read book Foreign Exchange Intervention under Policy Uncertainty written by Gustavo Adler and published by International Monetary Fund. This book was released on 2016-03-17 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Exchange Rate Policy and Interdependence by : Reuven Glick
Download or read book Exchange Rate Policy and Interdependence written by Reuven Glick and published by Cambridge University Press. This book was released on 2007-10-18 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past thirty years the Pacific Basin region has become more integrated with the rest of the world and played an increasingly important role in the world economy. While much has been written on Pacific Basin trade and economic growth, relatively few studies have been published on the conduct of exchange rate and monetary policies in the economies of the region. These papers should be of interest to readers with an interest in broadening their understanding of different exchange rate arrangements as well as those wishing to deepen their knowledge of Pacific Basin economies.
Book Synopsis Foreign Exchange Intervention by : Geert J. Almekinders
Download or read book Foreign Exchange Intervention written by Geert J. Almekinders and published by Edward Elgar Publishing. This book was released on 1995 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explains why central banks continue to carry out foreign exchange interventions despite their poor track record. It uses confidential daily intervention data from the Bundesbank and the Federal Reserve.
Book Synopsis Foreign Exchange Intervention As a Monetary Policy Instrument by : Felix Hufner
Download or read book Foreign Exchange Intervention As a Monetary Policy Instrument written by Felix Hufner and published by . This book was released on 2014-01-15 with total page 188 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Foreign Exchange Intervention in Developing and Transition Economies by : Mr.Jorge Iván Canales Kriljenko
Download or read book Foreign Exchange Intervention in Developing and Transition Economies written by Mr.Jorge Iván Canales Kriljenko and published by International Monetary Fund. This book was released on 2003-05-01 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Empirics of Foreign Exchange Intervention in Emerging Markets by : Roberto Pereira Guimarães
Download or read book The Empirics of Foreign Exchange Intervention in Emerging Markets written by Roberto Pereira Guimarães and published by International Monetary Fund. This book was released on 2004-07-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
