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Interdependencies between Monetary Policy and Foreign Exchange Intervention under Inflation Targeting: The Case of Brazil and the Czech Republic

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  • Jean-Yves Gnabo
  • Luiz de Mello
  • Diego Moccero

Abstract

The bulk of recent literature on foreign exchange interventions has overlooked the potential interdependencies that may exist between these operations and the conduct of monetary policy. This is the case even under inflation targeting and especially in emerging-market economies, because central banks often explicitly reserve the right to intervene to calm disorderly markets and to accumulate foreign reserves, and when the exchange rate is perceived as being out of step with fundamentals.

Suggested Citation

  • Jean-Yves Gnabo & Luiz de Mello & Diego Moccero, 2008. "Interdependencies between Monetary Policy and Foreign Exchange Intervention under Inflation Targeting: The Case of Brazil and the Czech Republic," WIDER Working Paper Series RP2008-95, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2008-95
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    Cited by:

    1. Catalán-Herrera, Juan, 2016. "Foreign exchange market interventions under inflation targeting: The case of Guatemala," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 42(C), pages 101-114.
    2. Chertman, Fernando & Hutchison, Michael & Zink, David, 2020. "Facing the Quadrilemma: Taylor rules, intervention policy and capital controls in large emerging markets," Journal of International Money and Finance, Elsevier, vol. 102(C).
    3. Milan Nedeljkovic & Christian Saborowski, 2019. "The Relative Effectiveness of Spot and Derivatives‐Based Intervention," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(6), pages 1455-1490, September.

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    More about this item

    Keywords

    Central banking; Foreign exchange; Monetary policy;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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