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On the Effectiveness of Exchange Rate Interventions in Emerging Markets

  • Christian Daude

    (OECD)

  • Eduardo Levy Yeyati

    (Universidad Torcuato Di Tella)

  • Arne Nagengast

    (Deutsche Bundesbank)

We analyse the effectiveness of exchange rate interventions for a panel of 18 emerging market economies during the period 2003-11. Using an error-correction model approach, we find that on average intervention is effective in moving the real exchange rate in the desired direction, controlling for deviations from the equilibrium and short-term changes in fundamentals and global financial variables. Our results are robust to different samples and estimation methods. We find little evidence of asymmetries in the effect of sales and purchases, but some evidence of more effective interventions for large deviations from the equilibrium. We also explore differences across countries according to the possible transmission channels and nature of some global shocks. Nous analysons l’efficacité des interventions sur le taux de change pour un panel de 18 économies de marché émergentes pendant la période 2003-11. À l’aide d’une approche basée sur un modèle à correction d’erreurs, nous trouvons que, en moyenne, l’intervention est efficace pour faire évoluer le taux de change réel dans la direction désirée, en contrôlant pour les écarts à l’équilibre et les variations à court-terme des fondamentaux et des variables financières globales. Nos résultats ressortent comme robustes à différents échantillons et méthodes d’estimation. Nous dégageons peu d’évidences d’asymétries dans la vente et l’achat, mais certains signes d’une plus grande efficacité d’interventions pour de grands écarts à l’équilibre. Nous explorons également les différences entre pays selon les canaux de transmission possibles et la nature de certains chocs globaux.

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File URL: http://dx.doi.org/10.1787/5jxwwfmxfdth-en
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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 324.

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Date of creation: 22 Sep 2014
Handle: RePEc:oec:devaaa:324-en
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