On central bank interventions in the Mexican peso/dollar foreign exchange market

Santiago Garcia-Verdu and Miguel Zerecero

No 429, BIS Working Papers from Bank for International Settlements

Abstract: In recent years the Bank of Mexico has made a series of rules-based interventions in the peso/dollar foreign exchange market. We assess the effectiveness of two specific interventions that occurred in periods of great stress for the Mexican economy. The aims of these two interventions were, respectively, to provide liquidity and to promote orderly conditions in the foreign exchange market. For our analysis, we follow the framework implemented by Dominguez (2003) and Dominguez (2006), an event-style microstructure approach. We use the bid-ask spreads as a measure of liquidity and of orderly conditions. In general, our results show no indication of an effect in the opposite direction from the one intended for the first intervention and are fairly conclusive regarding a significant reduction on the bid-ask spread for the second intervention.

Keywords: foreign exchange rate; central bank interventions; microstructure (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cba, nep-mon and nep-mst
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: On Central Bank Interventions in the Mexican Peso/Dollar Foreign Exchange Market (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:429

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