Official Intervention in the Foreign Exchange Market PDF Download

Author: Lucio Sarno
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 56

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Author: Rasmus Fatum
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 42

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"This paper investigates whether official Japanese intervention in the JPY/USD exchange rate over the January 1999 to March 2004 time period is effective. By integrating the official intervention data with a comprehensive set of newswire reports capturing days on which there is a rumor or speculation of intervention, the paper also attempts to shed some light on through which of the two channels, the signaling channel in a broad sense or the portfolio balance channel, effective Japanese intervention works. The results suggest that Japanese intervention is effective during the first 5 years of the sample and ineffective during the last 3 months of the sample, thereby providing an ex-post rationale for why Japan intervened as well as for why the interventions stopped. Moreover, the results suggest that when Japanese intervention is effective, it works through a portfolio-balance channel. The results do not rule out that effective intervention also works through signaling."--Author's abstract.

Author: Kathryn M. Dominguez
Publisher: Peterson Institute for International Economics
ISBN:
Category : Business & Economics
Languages : en
Pages : 196

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How much impact on exchange rates do central banks have when they buy and sell currencies? According to many analysts, such intervention has no independent impact. This book challenges the conventional wisdom, demonstrating that such intervention can be an effective and extremely important tool for policymakers. Using previously unavailable daily intervention data from the US Federal Reserve and German Bundesbank, the authors show that even "sterilized" intervention -intervention that entails no corresponding changes in monetary policy- has a significant effect. A key element is whether the intervention is known to the public: widespread market awareness of the activity adds substantially to its payoff. Authors Dominguez and Frankel draw implications for intervention policy and its role in international economic policy coordination.

Author: Kathryn M. Dominguez
Publisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 66

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The scale of unilateral and coordinated intervention in the foreign exchange market by the G-5 countries has become considerably larger over the last few years, following a period in which official U.S. policy was opposed to intervention. This paper examines market responses to official sterilized central bank intervention policy over the period 1985 through 1987. The efficacy of sterilized intervention is hypothesized to depend on the market's belief that central banks both have "inside" information about future monetary policy and the incentive to reveal that information truthfully through intervention signals. Central banks may agree to coordinate their intervention operations in order to influence the market's perception of the relative importance and credibility of own signals. Market responses to intervention over the period 1985 through 1987 are examined econometrically using heretofore unavailable daily data on G-3 unilateral and coordinated intervention operations. The empirical evidence indicates that: (1) even though daily intervention data are not published, market participants were generally able to comtemporaneously observe the source and magnitude of central bank intervention operations, (2) unilateral intervention significantly influenced market expectations in some periods, and (3) coordinated intervention had a significantly different and longer-term influence on market expectations than did unilateral intervention over the three year period examined.

Author: Roberto Pereira Guimarães
Publisher: International Monetary Fund
ISBN: 1451854641
Category : Business & Economics
Languages : en
Pages : 34

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This paper analyzes the effects of intervention on the level and volatility of the exchange rate in Mexico and Turkey, two emerging countries that have floating exchange rate regimes. The paper finds mixed evidence on the effectiveness of intervention. In Mexico, foreign exchange sales have a small impact on the exchange rate level and raise short-term volatility, while in Turkey, intervention does not appear to affect the exchange rate level but reduces its shortterm volatility. In both cases, the findings are consistent with officially stated policy objectives, which aim to minimize the effect of intervention on the exchange rate, but cast doubt on claims that intervention is a useful tool for smoothing volatility. Although these findings cannot be generalized to other emerging markets, intervention's apparently limited effectiveness highlights the need for central banks to use their scarce foreign reserves selectively and parsimoniously.

Author: Lawrence C. Hilbert
Publisher: Nova Publishers
ISBN: 9781604560787
Category : Foreign exchange
Languages : en
Pages : 178

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A currency is a unit of exchange, facilitating the transfer of goods and services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. A currency zone is a country or region in which a specific currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates, which are the prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime. In common usage, currency sometimes refers to only paper money, as in coins and currency, but this is misleading. Coins and paper money are both forms of currency. In most cases, each country has monopoly control over the supply and production of its own currency. Member countries of the European Union's Economic and Monetary Union are a notable exception to this rule, as they have c

Author: Shinji Takagi
Publisher: Oxford University Press, USA
ISBN: 0198714653
Category : Business & Economics
Languages : en
Pages : 333

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Book Description
Conquering the Fear of Freedom presents an analytical review of Japanese exchange rate policy from the end of World War II to the present. It examines how authorities, starting with the imposition of draconian controls over all international financial flows, moved toward eliminating virtually all state interference regulating foreign exchange transactions, including official intervention in the foreign exchange market. It describes how policy and institutional frameworks evolved, explains their domestic and international contexts, and assesses the impacts and consequences of policy actions. Following successful exchange rate-based stabilization in the early 1950s, Japan entered the world trading system with an overvalued currency, which helped perpetuate exchange and capital controls. As the culture of administrative control became ingrained, Japan took a decidedly gradualist approach to establishing current and capital account convertibility. The protracted capital account liberalization, coupled with slow domestic financial liberalization, created large swings in the yen's exchange rate when it was floated in the 1970s. Politicization by major trading partners of Japan's large bilateral trade surplus pressured authorities to subordinate domestic stability to external objectives. The ultimate outcome was costly: from the late 1980s, Japan successively experienced asset price inflation, a banking crisis, and economic stagnation. The book concludes by arguing that the shrinking trade surplus against the background of profound structural changes, the rise of China that has diminished the political intensity of any remaining bilateral economic issues, and the world's sympathy over two decades of deflation have given Japan, at least for now, the freedom to use macroeconomic policies for domestic purposes.

Author: Mr.Jorge Iván Canales Kriljenko
Publisher: International Monetary Fund
ISBN: 9781589064218
Category : Business & Economics
Languages : en
Pages : 58

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Book Description
Despite increasing exchange rate flexibility, central banks in emerging markets still intervene in their foreign exchange markets for several reasons. In doing so, they face many operational questions, including on the degree of transparency and the choice of markets and counterparties. This paper identifies elements of best practice in official foreign exchange intervention, presents survey evidence on intervention practices in developing countries, and assesses the effectiveness of intervention in Mexico and Turkey.

Author: Dhruv Sharma
Publisher: Dhruv Sharma
ISBN: 1973410125
Category : Business & Economics
Languages : en
Pages : 182

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Book Description
This book documents, observes, and models the 'trial and error' period following Bretton Woods Collapse of Foreign Exchange Interventions by the G-3 Advanced Economies. The book serves as a narration and analytical reader for Exchange Rate Intervention Economics for this period of 1973 to 2004.

Author: International Monetary Fund. Asia and Pacific Dept
Publisher: International Monetary Fund
ISBN: 1589066685
Category : Business & Economics
Languages : en
Pages : 65

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Book Description
Economic developments in Asia have been positive so far in 2007. Growth has been stronger (and in many cases more balanced) than expected across much of the region, again led by China and India, and inflation pressures remain largely contained. Moreover, Asia weathered the recent financial turbulence relatively well. The outlook is favorable, with growth expected to decline only modestly in 2008 as foreign demand for Asia’s exports slows. The main risk for the region is a sharper-than-expected global slowdown.