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Foreign exchange intervention and expectation in emerging economies

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  • Ken Miyajima

Abstract

Using monthly data for four selected emerging economies, sterilised central bank foreign exchange intervention is found to have little systematic influence on the near-term nominal exchange rate expectations in the direction intended by the central banks. In other words, central bank dollar purchases to stem exchange rate appreciation or related exchange rate volatility are not associated with an adjustment of the near-term exchange rate forecasts in the direction of depreciation, and vice versa. This suggests intervention may not change the nearterm exchange rate expectations. Moreover, intervention may have had unintended effects in the sense that it can lead to undesired volatility in the exchange rate, which is consistent with previous studies.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 414.

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Length: 29 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:bis:biswps:414

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Keywords: exchange rate expectation; foreign exchange intervention;

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References

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Cited by:
  1. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Utilizarea cursurilor valutare drept ancore nominale antiinflaţioniste
    [The use of exchange rates as nominal anchors]
    ," MPRA Paper 52415, University Library of Munich, Germany.

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