Lanterna Rally
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Foreign Exchange Intervention as a Monetary Policy Instrument
Author: Felix Hüfner
Publisher: Springer Science & Business Media
Published: 2012-12-06
Total Pages: 180
ISBN-13: 3790826723
DOWNLOAD EBOOK →Foreign exchange intervention is frequently being used by central banks in countries which have a floating exchange rate. Most theoretical monetary policy models, however, do not take this phenomenon into account. This book contributes to close this gap between theory and practice by interpreting foreign exchange intervention as an additional monetary policy instrument for inflation targeting central banks. In-depth empirical analyses of the foreign exchange operations and interest rate policy of five inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom) demonstrate how foreign exchange intervention is used in practice.
The Cost of Foreign Exchange Intervention
Author: Gustavo Adler
Publisher: International Monetary Fund
Published: 2016-04-12
Total Pages: 37
ISBN-13: 148433230X
DOWNLOAD EBOOK →The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.
Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework
Author: Romain Lafarguette
Publisher: International Monetary Fund
Published: 2021-02-12
Total Pages: 33
ISBN-13: 1513569406
DOWNLOAD EBOOK →This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Theory of Exchange Market Intervention
Author: Wilbur F. Monroe
Publisher:
Published: 1970
Total Pages: 84
ISBN-13: 9780884060635
DOWNLOAD EBOOK →The Theory of Exchange Market Intervention
Author: Wilbur F. Monroe
Publisher:
Published:
Total Pages: 45
ISBN-13: 9780598160997
DOWNLOAD EBOOK →Exchange Rate Management: Theory and Evidence
Author: Keith Pilbeam
Publisher: Springer
Published: 1991-06-18
Total Pages: 233
ISBN-13: 1349117447
DOWNLOAD EBOOK →An examination of the economic justification for foreign exchange market intervention, the potential for such intervention to stabilize an economy and the distinction between sterilized and non-sterilized intervention.
Foreign Exchange Intervention
Author: Geert J. Almekinders
Publisher: Edward Elgar Publishing
Published: 1995
Total Pages: 248
ISBN-13:
DOWNLOAD EBOOK →This book explains why central banks continue to carry out foreign exchange interventions despite their poor track record. It uses confidential daily intervention data from the Bundesbank and the Federal Reserve.
Strained Relations
Author: Michael D. Bordo
Publisher: University of Chicago Press
Published: 2015-03-02
Total Pages: 453
ISBN-13: 022605151X
DOWNLOAD EBOOK →During the twentieth century, foreign-exchange intervention was sometimes used in an attempt to solve the fundamental trilemma of international finance, which holds that countries cannot simultaneously pursue independent monetary policies, stabilize their exchange rates, and benefit from free cross-border financial flows. Drawing on a trove of previously confidential data, Strained Relations reveals the evolution of US policy regarding currency market intervention, and its interaction with monetary policy. The authors consider how foreign-exchange intervention was affected by changing economic and institutional circumstances—most notably the abandonment of the international gold standard—and how political and bureaucratic factors affected this aspect of public policy.
The theory of forward exchange and effects of government intervention on the forward exchange market
