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Official Intervention in the Foreign Exchange Market; Elements of Best Practice

Listed author(s):
  • Jorge I Canales Kriljenko
  • Cem Karacadag
  • Roberto Pereira Guimarães
Registered author(s):

    This paper offers guidance on the operational aspects of official intervention in the foreign exchange market, particularly in developing countries with flexible exchange rate regimes. A brief survey of the literature and country experience is followed by an analysis of the objectives, timing, amount, degree of transparency, and choice of markets and counterparties in conducting intervention. The analysis highlights the difficulty of detecting exchange rate misalignments and disorderly markets, and argues in favor of parsimony in official intervention. Determining the timing and amount of intervention is a highly subjective excercise, and some degree of discretion is almost necessary, though policy rules may serve as "rules of thumb."

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16787
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/152.

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    Length: 41
    Date of creation: 01 Jul 2003
    Handle: RePEc:imf:imfwpa:03/152
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    12. Jorion, Philippe, 1995. " Predicting Volatility in the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 50(2), pages 507-528, June.
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    15. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
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    20. Geraats, Petra M., 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series qt0hw7h7cp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
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    22. 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.
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