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Foreign Exchange Intervention in Developing and Transition Economies

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  • Jorge Iván Canales Kriljenko
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    Abstract

    Based on evidence obtained from the IMF''s 2001 Survey on Foreign Exchange Market Organization, the author argues that, for several reasons, some central banks in developing and transition economies may be able to conduct foreign exchange intervention more effectively than the central banks of developed countries issuing the major international currencies. First, these central banks do not always fully sterilize their foreign exchange interventions. In addition, they issue regulations and conduct their foreign exchange operations in a way that increases the central bank''s information advantage and the size of their foreign exchange intervention relative to foreign exchange market turnover. Some of the central banks also use moral suasion to support their foreign exchange interventions.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/95.

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    Length: 59
    Date of creation: 01 May 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/95

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    Related research

    Keywords: Exchange restrictions; Exchange rate stability; foreign exchange; exchange rate; foreign exchange intervention; foreign exchange market; exchange rate regime; exchange rate regimes; exchange rates; market access; exchange rate regime classification; de facto exchange rate regime; foreign currency; foreign exchange interventions; foreign exchange positions; exchange markets; foreign exchange markets; foreign exchange transactions; exchange transactions; exchange operations; floating exchange rate; foreign exchange operations; exchange rate volatility; exchange sales; floating exchange rate regimes; foreign exchange sales; currency boards; flexible exchange rate; foreign currencies; flexible exchange rate regimes; foreign exchange position; exchange rate policies; exchange purchases; exchange rate expectations; foreign exchange purchases; exchange rate risk; currency depreciation; exchange controls; foreign exchange controls; exchange auctions; fixed exchange rate; foreign exchange auctions; exchange arrangements; currency substitution; exchange rate pressures; fixed exchange rate regime; international settlements; floating exchange rate regime; exchange market intervention; exchange rate determination; exchange rate dynamics; foreign bonds; exchange market activity; foreign exchange risk; foreign exchange earnings; optimal exchange rate regime; exchange risk; exchange rate fluctuations; exchange rate developments; exchange rate policy; spot exchange rates; exchange rate data; exchange earnings; currency appreciation; market structures; flexible exchange rates; macroeconomic stability; exchange rate path; fixed exchange rate regimes;

    References

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    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.:
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    1. Michael W. Klein, 1992. "The Accuracy of Reports of Foreign Exchange Intervention," NBER Working Papers 4165, National Bureau of Economic Research, Inc.
    2. Don E. Roper & Stephen J. Turnovsky, 1980. "Optimal Exchange Market Intervention in a Simple Stochastic Macro Model," Canadian Journal of Economics, Canadian Economics Association, vol. 13(2), pages 296-309, May.
    3. Fatum, Rasmus, 2000. "On the effectiveness of sterilized foreign exchange intervention," Working Paper Series 0010, European Central Bank.
    4. 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.
    5. Vitale, Paolo, 1999. "Sterilised central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, vol. 49(2), pages 245-267, December.
    6. Naranjo, Andy & Nimalendran, M, 2000. "Government Intervention and Adverse Selection Costs in Foreign Exchange Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 453-77.
    7. William P. Osterberg & Rebecca Wetmore Humes, 1993. "The inaccuracy of newspaper reports of U.S. foreign exchange intervention," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 25-33.
    8. Akira Ariyoshi & Andrei Kirilenko & Inci Ötker & Bernard Laurens & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier, 2000. "Capital Controls," IMF Occasional Papers 190, International Monetary Fund.
    9. Killeen, William P. & Lyons, Richard K. & Moore, Michael J., 2006. "Fixed versus flexible: Lessons from EMS order flow," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 551-579, June.
    10. Ben Craig & Owen Humpage, 2001. "Sterilized intervention, nonsterilized intervention, and monetary policy," Working Paper 0110, Federal Reserve Bank of Cleveland.
    11. Boyer, Russell S, 1978. "Optimal Foreign Exchange Market Intervention," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1045-55, December.
    12. Popper, Helen & Montgomery, John D., 2001. "Information sharing and central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, vol. 55(2), pages 295-316, December.
    13. Hung, Juann H, 1997. "Intervention strategies and exchange rate volatility: a noise trading perspective," Journal of International Money and Finance, Elsevier, vol. 16(5), pages 779-793, September.
    14. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate," IMF Working Papers 00/95, International Monetary Fund.
    15. Cheung, Yin-Wong & Chinn, Menzie David, 2001. "Currency traders and exchange rate dynamics: a survey of the US market," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 439-471, August.
    16. Jones, Michael, 1984. "Optimal Foreign Exchange Market Intervention: Evidence from the Bretton Woods Era," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 242-55, May.
    17. Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 161-190, February.
    18. Richard T. Baillie & Owen F. Humpage & William P. Osterberg, 1999. "Intervention as information: a survey," Working Paper 9918, Federal Reserve Bank of Cleveland.
    19. Taylor, Dean, 1982. "Official Intervention in the Foreign Exchange Market, or, Bet against the Central Bank," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 356-68, April.
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