Description

We study the effect of foreign exchange intervention on the exchange rate relying on aninstrumental-variables panel approach. We find robust evidence that intervention affects thelevel of the exchange rate in an economically meaningful way. A purchase of foreign currencyof 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates inthe ranges of [1.7-2.0] percent and [1.4-1.7] percent respectively. The effects are found to bequite persistent. The paper also explores possible asymmetric effects, and whethereffectiveness depends on the depth of domestic financial markets.

More publications in this series: Working Papers

More publications by: Gustavo Adler ; Noemie Lisack ; Rui Mano