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Exchange Rate Swings And Foreign Currency Intervention
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Book Synopsis Exchange-Rate Swings and Foreign Currency Intervention by : Andrew Filardo
Download or read book Exchange-Rate Swings and Foreign Currency Intervention written by Andrew Filardo and published by International Monetary Fund. This book was released on 2022-07-29 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
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 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 How to Move the Exchange Rate If You Must by : Kaushik Basu
Download or read book How to Move the Exchange Rate If You Must written by Kaushik Basu and published by . This book was released on 2017 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper is about the art of exchange rate management by central banks. It begins by reviewing the diversity of objectives and practices of central bank intervention in the foreign exchange market. Central banks typically exercise discretion in determining when and to what extent to intervene. Some central banks use publicly declared rules of intervention, with the aim of increasing visibility and strengthening the signaling channel of policy. There is tentative evidence that the volatility of foreign exchange reserves is comparatively lower in emerging market economies where central banks follow some form of rules-based foreign exchange intervention. The paper goes on to argue that when the foreign exchange market includes some large strategic participants, the central bank can achieve superior outcomes if intervention takes the form of a rule, or "schedule," indicating commitments to buying and selling different quantities of foreign currency conditional on the exchange rate. Exchange rate management and reserve management can then be treated as two independent objectives by the central bank. In line with the stylized facts reviewed, this would enable a central bank to pursue exchange rate objectives with minimum reserve changes, or achieve reserve targets with minimum impact on the exchange rate.
Author :Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico Publisher : ISBN 13 :9789291319626 Total Pages :0 pages Book Rating :4.3/5 (196 download)
Book Synopsis Market Volatility and Foreign Exchange Intervention in EMEs by : Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico
Download or read book Market Volatility and Foreign Exchange Intervention in EMEs written by Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 How to Move the Exchange Rate If You Must by : Kaushik Basu
Download or read book How to Move the Exchange Rate If You Must written by Kaushik Basu and published by . This book was released on 2013 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper is about the art of exchange rate management by central banks. It begins by reviewing the diversity of objectives and practices of central bank intervention in the foreign exchange market. Central banks typically exercise discretion in determining when and to what extent to intervene. Some central banks use publicly declared rules of intervention, with the aim of increasing visibility and strengthening the signaling channel of policy. There is tentative evidence that the volatility of foreign exchange reserves is comparatively lower in emerging market economies where central banks follow some form of rules-based foreign exchange intervention. The paper goes on to argue that when the foreign exchange market includes some large strategic participants, the central bank can achieve superior outcomes if intervention takes the form of a rule, or "schedule, " indicating commitments to buying and selling different quantities of foreign currency conditional on the exchange rate. Exchange rate management and reserve management can then be treated as two independent objectives by the central bank. In line with the stylized facts reviewed, this would enable a central bank to pursue exchange rate objectives with minimum reserve changes, or achieve reserve targets with minimum impact on the exchange rate.
Book Synopsis Patterns of Foreign Exchange Intervention under Inflation Targeting by : Gustavo Adler
Download or read book Patterns of Foreign Exchange Intervention under Inflation Targeting written by Gustavo Adler and published by International Monetary Fund. This book was released on 2020-05-29 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Role of the Exchange Rate in Inflation-Targeting Emerging Economies by : Anna Nordstrom
Download or read book The Role of the Exchange Rate in Inflation-Targeting Emerging Economies written by Anna Nordstrom and published by International Monetary Fund. This book was released on 2009-11-24 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
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 Flexible Exchange Rates for a Stable World Economy by : Joseph E. Gagnon
Download or read book Flexible Exchange Rates for a Stable World Economy written by Joseph E. Gagnon and published by Peterson Institute. This book was released on 2011 with total page 301 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatile exchange rates and how to manage them are a contentious topic whenever economic policymakers gather in international meetings. This book examines the broad parameters of exchange rate policy in light of both high-powered theory and real-world experience. What are the costs and benefits of flexible versus fixed exchange rates? How much of a role should the exchange rate play in monetary policy? Why don't volatile exchange rates destabilize inflation and output? The principal finding of this book is that using monetary policy to fight exchange rate volatility, including through the adoption of a fixed exchange rate regime, leads to greater volatility of employment, output, and inflation. In other words, the "cure" for exchange rate volatility is worse than the disease. This finding is demonstrated in economic models, in historical case studies, and in statistical analysis of the data. The book devotes considerable attention to understanding the reasons why volatile exchange rates do not destabilize inflation and output. The book concludes that many countries would benefit from allowing greater flexibility of their exchange rates in order to target monetary policy at stabilization of their domestic economies. Few, if any, countries would benefit from a move in the opposite direction.
Book Synopsis From Fixed to Float by : Gilda Fernandez
Download or read book From Fixed to Float written by Gilda Fernandez and published by International Monetary Fund. This book was released on 2004-07 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with the new regime, establishing an alternative nominal anchor in the context of a new monetary policy framework, and building the capacity of market participants to manage exchange rate risks and of supervisory authorities to regulate and monitor them. It also assesses the factors that influence the pace of exit and the appropriate sequencing of exchange rate flexibility and capital account liberalization.
Book Synopsis Does Foreign Exchange Intervention Signal Future Monetary Policy? by : Graciela Laura Kaminsky
Download or read book Does Foreign Exchange Intervention Signal Future Monetary Policy? written by Graciela Laura Kaminsky and published by . This book was released on 1993 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: A frequently cited explanation for why sterilized interventions may affect exchange rates is that these interventions signal central banks' future monetary policy intentions. This explanation presumes that central banks in fact back up interventions with subsequent changes in monetary policy. We empirically examine this hypothesis using data on market observations of U.S. intervention together with monetary policy variables, and exchange rates. We strongly reject the hypothesis that interventions convey no signal. However, we also find that in some episodes, intervention signaled changes in monetary policy in the opposite direction of the conventional signaling story. This finding can explain why in some periods exchange rates moved in the opposite direction of that suggested by intervention.
Book Synopsis US foreign-exchange-market intervention during the Volcker-Greenspan era by : Michael D. Bordo
Download or read book US foreign-exchange-market intervention during the Volcker-Greenspan era written by Michael D. Bordo and published by . This book was released on 2010 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Federal Reserve abandoned foreign-exchange-market intervention because it conflicted with the System's commitment to price stability. By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-market intervention did not provide central banks with a mechanism for systematically influencing exchange rates independent of their monetary policies. If intervention were to have anything other than a fleeting, hit-or-miss, effect on exchange rates, monetary policy had to support it. Exchange rates, however, often responded to U.S. monetary-policy initiatives, so intervention to offset or reverse those exchange-rate responses can seem a contrary policy move and can create uncertainty about the strength of the System's commitment to price stability. That the U.S. Treasury maintained primary responsibility for foreign-exchange intervention only compounded this uncertainty. In addition, many FOMC participants feared that swap drawings and warehousing could contravene the Congressional appropriations process and, therefore, potentially pose a threat to System independence, a necessary condition for monetary-policy credibility.
Book Synopsis Exchange-rate Management in Theory and Practice by : Victor E. Argy
Download or read book Exchange-rate Management in Theory and Practice written by Victor E. Argy and published by . This book was released on 1982 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Fixed or Floating Exchange Regimes by : Peter J. Quirk
Download or read book Fixed or Floating Exchange Regimes written by Peter J. Quirk and published by International Monetary Fund. This book was released on 1994-11-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews recent experience with the choice of floating or fixed (“anchor”) exchange regimes in industrial and developing countries. It concludes that desirable differences between the two sets of regimes have narrowed, owing to the useful operational role of exchange rate margins and unavoidable medium-term rate adjustments in the context of fixed regimes. A survey of recent empirical cross-country literature also suggests little unambiguous association of the choice of exchange regime with macroeconomic performance, inflation in particular. Stability of the exchange rate has generally been a by-product of other policy choices. Even announcement effects of the regime on inflation-fighting credibility depend on the country-specific assignments of policy instruments to more than one institution--central bank, government, or regional and multilateral institutions.
Book Synopsis Exchange Rate Economics by : Ronald MacDonald
Download or read book Exchange Rate Economics written by Ronald MacDonald and published by Routledge. This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: ''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""
