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Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets

  • Matthew S Malloy
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    Using panel data for 15 economies from 2001-12, I identify determinants of central bank foreign exchange intervention in emerging markets (“EMsâ€) with flexible to moderately managed exchange rates. Similar to other studies, I find that central banks tend to “lean against the wind,†buying/selling more foreign exchange in response to greater short-run and medium-run appreciation/depreciation pressures. The panel structure provides a framework to test whether other macroeconomic variables influence the different rates of reserve accumulation between economies. In testing other variables, I find evidence of both precautionary and external competitiveness motives for reserve accumulation.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/70.

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    Length: 28
    Date of creation: 15 Mar 2013
    Date of revision:
    Handle: RePEc:imf:imfwpa:13/70
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    1. Kim, Suk-Joong & Sheen, Jeffrey, 2004. "Central Bank Interventions in the Yen-Dollar Spot Market," Working Papers 4, University of Sydney, School of Economics.
    2. Almekinders, Geert J. & Eijffinger, Sylvester C. W., 1996. "A friction model of daily Bundesbank and Federal Reserve intervention," Journal of Banking & Finance, Elsevier, vol. 20(8), pages 1365-1380, September.
    3. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2008. "Financial Stability, the Trilemma, and International Reserves," NBER Working Papers 14217, National Bureau of Economic Research, Inc.
    4. repec:fth:sydnec:99-19 is not listed on IDEAS
    5. repec:ner:tilbur:urn:nbn:nl:ui:12-73527 is not listed on IDEAS
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