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The effectiveness of forex interventions in four Latin American countries


  • Broto, Carmen


Many central banks actively intervene in the forex market, although there is no consensus on its impact on the exchange rate level and volatility. We analyze the effects of daily forex interventions in four Latin American economies with inflation targets – namely, Chile, Colombia, Mexico and Peru – by fitting GARCH-type models. These countries represent a broad span of intervention strategies in terms of size and frequency, ranging from pure discretional to rule-based interventions. We find that only first interventions, either isolated or the initial one in a rule-based series, are able to reduce exchange rate volatility, whereas their size plays a minor role.

Suggested Citation

  • Broto, Carmen, 2013. "The effectiveness of forex interventions in four Latin American countries," Emerging Markets Review, Elsevier, vol. 17(C), pages 224-240.
  • Handle: RePEc:eee:ememar:v:17:y:2013:i:c:p:224-240
    DOI: 10.1016/j.ememar.2013.03.003

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pablo Pincheira, 2013. "Interventions and Inflation Expectations in an Inflation Targeting Economy," Working Papers Central Bank of Chile 693, Central Bank of Chile.
    2. Erick Lahura & Marco Vega, 2013. "Asymmetric effects of FOREX intervention using intraday data: evidence from Peru," BIS Working Papers 430, Bank for International Settlements.
    3. repec:wsi:qjfxxx:v:04:y:2014:i:01:n:s2010139214500025 is not listed on IDEAS
    4. Santiago García-Verdú & Manuel Ramos-Francia, 2014. "Interventions and Expected Exchange Rates in Emerging Market Economies," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-34.
    5. Renzo Rossini & Zenon Quispe & Enrique Serrano, 2013. "Foreign exchange intervention in Peru," BIS Papers chapters,in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 243-262 Bank for International Settlements.
    6. Rossini, Renzo & Quispe, Zenón & Serrano, Enrique, 2014. "Intervención cambiaria en el Perú: 2007 a 2013," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 27, pages 9-24.
    7. Melesse Tashu, 2014. "Motives and Effectiveness of Forex Interventions; Evidence from Peru," IMF Working Papers 14/217, International Monetary Fund.
    8. X. Fernández, Bernardo & Fernández Q., Vladimir & Aldazosa, E. Rene, 2017. "Una Subasta Doble de Divisas para la Determinación del Tipo de Cambio en Bolivia," Documentos de trabajo 4/2017, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    9. Santiago García-Verdú & Miguel Zerecero, 2013. "On central bank interventions in the Mexican peso/dollar foreign exchange market," BIS Working Papers 429, Bank for International Settlements.

    More about this item


    Exchange rate volatility; Foreign exchange interventions; GARCH;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling


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