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The effectiveness of forex interventions in four Latin American countries

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  • Broto, Carmen

Abstract

Many central banks actively intervene in the forex market, although there is no consensus on its impact on the exchange rate level and volatility. We analyze the effects of daily forex interventions in four Latin American economies with inflation targets – namely, Chile, Colombia, Mexico and Peru – by fitting GARCH-type models. These countries represent a broad span of intervention strategies in terms of size and frequency, ranging from pure discretional to rule-based interventions. We find that only first interventions, either isolated or the initial one in a rule-based series, are able to reduce exchange rate volatility, whereas their size plays a minor role.

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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 17 (2013)
Issue (Month): C ()
Pages: 224-240

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Handle: RePEc:eee:ememar:v:17:y:2013:i:c:p:224-240

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Web page: http://www.elsevier.com/locate/inca/620356

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Keywords: Exchange rate volatility; Foreign exchange interventions; GARCH;

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References

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Citations

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Cited by:
  1. Santiago García-Verdú & Manuel Ramos Francia, 2014. "Interventions and Expected Exchange Rates in Emerging Market Economies," Working Papers 2014-11, Banco de México.
  2. Santiago García-Verdú & Miguel Zerecero, 2013. "On central bank interventions in the Mexican peso/dollar foreign exchange market," BIS Working Papers 429, Bank for International Settlements.
  3. Erick Lahura & Marco Vega, 2013. "Asymmetric effects of FOREX intervention using intraday data: evidence from Peru," BIS Working Papers 430, Bank for International Settlements.
  4. Pablo Pincheira, 2013. "Interventions and inflation expectations in an inflation targeting economy," BIS Working Papers 427, Bank for International Settlements.

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