Comparing the impact of discretionary and pre-announced central bank interventions

Francisco Luna Santos

Journal of International Money and Finance, 2021, vol. 110, issue C

Abstract: I explore the launching of a Brazilian massive program of foreign exchange (FX) interventions in August 2013 to compare discretionary and pre-announced interventions. Using an external instrument approach, I find that Brazilian currency (BRL) appreciates 29.4 bps for each USD 1 billion discretionary intervention and the impact is significant up to the following day of the intervention. In contrast, an intraday event-study shows that the pre-announced intervention program caused a total BRL appreciation of 460 bps. Its public release accounted for 120 bps, while the impact of individual auctions was spread over two months and accounted for the remaining 340 bps. Finally, discretionary interventions are more effective per USD billion.

Keywords: Foreign exchange rate interventions; High frequency; Event study; External instrument; Foreign exchange market; Brazil (search for similar items in EconPapers)
JEL-codes: E58 F31 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:110:y:2021:i:c:s0261560620302631

DOI: 10.1016/j.jimonfin.2020.102307

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