The Impact of Different Types of Foreign Exchange Intervention: An Event Study Approach
AbstractTo date, there is still great controversy as to which exchange rate model should be used or which monetary channel should be considered, when measuring the effects of monetary policy. Since most of the literature relies on structural models to address identification problems, the validity of results largely turn on how accurate the assumptions are in describing the full extent of the economy. In this paper we compare the effect of different types of central bank interventions using an event study approach for the Colombian case during the period 2000-2012, without imposing restrictive parametric assumptions or without the need to adopt a structural model. We find that all types of interventions (international reserve accumulation options, volatility options and discretionary) have been successful according to the smoothing criterion. In particular, volatility options seemed to have the strongest effect. We find that results are robust when using different windows sizes and counterfactuals.
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Bibliographic InfoPaper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 784.
Date of creation: Oct 2013
Date of revision:
Central bank intervention; foreign exchange intervention mechanisms; event study. Classification JEL: E52; E58; F31.;
Other versions of this item:
- Juan José Echavarría & Luis Fernando Melo Velandia & Mauricio Villamizar, 2013. "The Impact of Different Types of Foreign Exchange Intervention: An Event Study Approach," BORRADORES DE ECONOMIA 010985, BANCO DE LA REPÚBLICA.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-25 (All new papers)
- NEP-CBA-2013-10-25 (Central Banking)
- NEP-CSE-2013-10-25 (Economics of Strategic Management)
- NEP-IFN-2013-10-25 (International Finance)
- NEP-MAC-2013-10-25 (Macroeconomics)
- NEP-MON-2013-10-25 (Monetary Economics)
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.:
- Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010.
"DSGE models for monetary policy analysis,"
CQER Working Paper, Federal Reserve Bank of Atlanta
2010-02, Federal Reserve Bank of Atlanta.
- Hernando Vargas Herrera & Andrés González & Diego Rodríguez, 2013.
"Foreign Exchange Intervention in Colombia,"
BORRADORES DE ECONOMIA
010465, BANCO DE LA REPÚBLICA.
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