When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries
American Economic Journal: Macroeconomics
vol. 11,
no. 1, January 2019
(pp. 132-56)
Abstract
This paper examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and an effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication.Citation
Fratzscher, Marcel, Oliver Gloede, Lukas Menkhoff, Lucio Sarno, and Tobias Stöhr. 2019. "When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries." American Economic Journal: Macroeconomics, 11 (1): 132-56. DOI: 10.1257/mac.20150317Additional Materials
JEL Classification
- E52 Monetary Policy
- E58 Central Banks and Their Policies
- F31 Foreign Exchange
- F33 International Monetary Arrangements and Institutions
- O19 International Linkages to Development; Role of International Organizations
- O24 Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
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