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Epilogue: foreign-exchange-market operations in the twenty-first century

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  • Michael D. Bordo
  • Owen F. Humpage
  • Anna J. Schwartz

Abstract

Foreign-exchange operations did not end after the United States stopped its activist approach to intervention. Japan persisted in such operations, but avoided overt confl ict with its monetary policy. With the onset of the Great Recession, Switzerland has transacted in foreign exchange both for monetary and exchange rate purposes, and key central banks have used swap facilities to extended their lender-of-last-resort functions. Developing and emerging-market economies continue to intervene, but their actions may hamper the development of their own foreign-exchange markets. China’s undervalued exchange rate is producing inflation and real appreciation, despite China’s efforts to sterilize its reserve accumulation.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 1207.

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Date of creation: 2012
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Handle: RePEc:fip:fedcwp:1207

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Keywords: Foreign exchange market ; Financial markets ; International finance;

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References

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  1. Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007. "China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients," Working Papers, Hong Kong Institute for Monetary Research 102007, Hong Kong Institute for Monetary Research.
  2. Owen F. Humpage & Javiera Ragnartz, 2005. "Swedish intervention and the Krona float, 1993–2002," Working Paper 0514, Federal Reserve Bank of Cleveland.
  3. Bonser-Neal, Catherine & Roley, V Vance & Sellon, Gordon H, Jr, 1998. "Monetary Policy Actions, Intervention, and Exchange Rates: A Reexamination of the Empirical Relationships Using Federal Funds Rate Target Data," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 71(2), pages 147-77, April.
  4. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  5. Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2010. "International reserves and swap lines: substitutes or complements?," Santa Cruz Department of Economics, Working Paper Series qt04v2q5s7, Department of Economics, UC Santa Cruz.
  6. Humpage, Owen F, 1999. "U.S. Intervention: Assessing the Probability of Success," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(4), pages 731-47, November.
  7. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2011. "The Federal Reserve as an Informed Foreign Exchange Trader: 1973 – 1995," NBER Working Papers 17425, National Bureau of Economic Research, Inc.
  8. Raphael Auer & Sébastien Kraenzlin, 2011. "International liquidity provision during the financial crisis: a view from Switzerland," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Nov, pages 409-418.
  9. Ito, Takatoshi & Yabu, Tomoyoshi, 2007. "What prompts Japan to intervene in the Forex market? A new approach to a reaction function," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(2), pages 193-212, March.
  10. Rich, Georg, 2000. "Monetary Policy without Central Bank Money: A Swiss Perspective," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 3(3), pages 439-69, November.
  11. Galati, Gabriele & Melick, William & Micu, Marian, 2005. "Foreign exchange market intervention and expectations: The yen/dollar exchange rate," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(6), pages 982-1011, October.
  12. Michael J. Fleming & Nicholas J. Klagge, 2010. "The Federal Reserve's foreign exchange swap lines," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 16(Apr).
  13. Christopher J. Neely, 2011. "A foreign exchange intervention in an era of restraint," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Sep, pages 303-324.
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Cited by:
  1. Tervala, Juha, 2014. "China, the Dollar Peg and U.S. Monetary Policy," MPRA Paper 53223, University Library of Munich, Germany.
  2. Jesus Crespo Cuaresma & Mauro Costantini & Jaroslava Hlouskova, 2014. "Can Macroeconomists Get Rich Forecasting Exchange Rates?," Department of Economics Working Papers wuwp176, Vienna University of Economics, Department of Economics.
  3. Pablo Pincheira, 2013. "Interventions and inflation expectations in an inflation targeting economy," BIS Working Papers 427, Bank for International Settlements.

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