Advanced Search
MyIDEAS: Login

Effects of Foreign Exchange Intervention under Public Information: The Chilean Case

Contents:

Author Info

  • Matías Tapia

    ()

  • Andrea Tokman

    ()

Abstract

This paper studies the effects of exchange rate interventions using daily and intraday data for Chile, from 1998 to 2003. Its main contribution is the recognition of the role played by transparency and public announcements in the success of the intervention policy, through the existence of an expectations mechanism which directly impacts the exchange rate. Three foreign exchange policy instruments are distinguished -spot, dollar denominated papers (BCD´s) and announcements- and treated as independent interventions. Time series estimations are used to capture the effect of the traditionally studied spot interventions, as well as the effects associated to the announcement channel that we propose as potentially relevant. Results show that the impact of individual interventions (spot and BCD) are extremely small and, in most cases, non-significant. Also, the importance of the hypothesized announcement mechanism is confirmed. The impact of Central Bank actions on the exchange rate´s level and trend seem to be channeled through the public announcements made by the monetary authority. The market adjusts its expectations to the information revealed through them, with the exchange rate responding accordingly. These effects occur on longer time spans than the ones suggested by the traditional literature. The negligible effect of individual interventions is also found, for the year 2001, with the use of intraday data.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.brookings.edu/press/Journals/2004/economiaspring2004.aspx
Download Restriction: no

Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2004)
Issue (Month): ()
Pages:

as in new window
Handle: RePEc:col:000425:008671

Contact details of provider:

Related research

Keywords: exchange rates intervention; expetations mechanism; spot interventions; Chile;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
  2. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
  3. Matías Tapia & Andrea Tokman, 2003. "Efectos de las intervenciones en el mercado cambiario: el caso de Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 30(1 Year 20), pages 21-53, June.
  4. Felipe Morandé & Matías Tapia, 2002. "Exchange Rate Policy in Chile: From the Band to Floating and Beyond," Working Papers wp192, University of Chile, Department of Economics.
  5. Eduard Hochreiter & Klaus Schmidt-Hebbel & Georg Winckler, 2002. "Monetary Union: European Lessons, Latin American Prospects," Working Papers Central Bank of Chile 167, Central Bank of Chile.
  6. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
  7. John Williamson, 1999. "Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility," Policy Briefs PB99-03, Peterson Institute for International Economics.
  8. Jonathan Kearns & Roberto Rigobon, 2002. "Identifying the Efficacy of Central Bank Interventions: The Australian Case," NBER Working Papers 9062, National Bureau of Economic Research, Inc.
  9. Christopher J. Neely, 2001. "The practice of central bank intervention: looking under the hood," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-10.
  10. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate," IMF Working Papers 00/95, International Monetary Fund.
  11. Martin D. D. Evans & Richard K. Lyons, 2001. "Portfolio Balance, Price Impact, and Secret Intervention," NBER Working Papers 8356, National Bureau of Economic Research, Inc.
  12. Takatoshi Ito, 2002. "Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s," NBER Working Papers 8914, National Bureau of Economic Research, Inc.
  13. Mundaca, B. Gabriela, 2001. "Central bank interventions and exchange rate band regimes," Journal of International Money and Finance, Elsevier, vol. 20(5), pages 677-700, October.
  14. Yin-Wong Cheung & Menzie D. Chinn, 1999. "Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders," NBER Working Papers 7417, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:col:000425:008671. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Bernal).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.