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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"Foreign reserve and money dynamics with asset portfolio adjustment: international evidence,"
Pacific Basin Working Paper Series
94-09, Federal Reserve Bank of San Francisco.
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- Dittmar, Robert & Neely, Christopher J & Weller, Paul, 1996.
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CEPR Discussion Papers
1480, C.E.P.R. Discussion Papers.
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- Christopher J. Neely & Paul A. Weller & Robert Dittmar, 1997. "Is technical analysis in the foreign exchange market profitable? a genetic programming approach," Working Papers 1996-006, Federal Reserve Bank of St. Louis.
- Stephen J. Turnovsky, 1992. "Exchange rate management: a partial review," Proceedings, Federal Reserve Bank of San Francisco, pages 99-137.
- Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
- 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.
- Peiers, Bettina, 1997. " Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1589-1614, September.
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