Sterilized intervention, nonsterilized intervention, and monetary policy
Sterilized intervention is generally ineffective. Countries that conduct monetary policy using an overnight, interbank rate as an intermediate target automatically sterilize their interventions. Nonsterilized interventions can influence nominal exchange rates, but they conflict with price stability unless the underlying shocks prompting them are domestic in origin and monetary in nature. Nonsterilized interventions, however, are unnecessary since standard open-market operations can achieve the same result.
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1996-006, Federal Reserve Bank of St. Louis.
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- Reuven Glick & Michael Hutchison, 1994. "Foreign reserve and money dynamics with asset portfolio adjustment: international evidence," Pacific Basin Working Paper Series 94-09, Federal Reserve Bank of San Francisco.
- Stephen J. Turnovsky, 1992. "Exchange rate management: a partial review," Proceedings, Federal Reserve Bank of San Francisco, pages 99-137.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- 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, vol. 71(2), pages 147-77, April.
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