Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets

Matthew Malloy

No 2013/070, IMF Working Papers from International Monetary Fund

Abstract: Using panel data for 15 economies from 2001-12, I identify determinants of central bank foreign exchange intervention in emerging markets (“EMs”) with flexible to moderately managed exchange rates. Similar to other studies, I find that central banks tend to “lean against the wind,” buying/selling more foreign exchange in response to greater short-run and medium-run appreciation/depreciation pressures. The panel structure provides a framework to test whether other macroeconomic variables influence the different rates of reserve accumulation between economies. In testing other variables, I find evidence of both precautionary and external competitiveness motives for reserve accumulation.

Keywords: WP; reserve; central bank; exchange rate; intervention; foreign exchange intervention; international reserves; intervention data; FX intervention; adequacy dummy; o r; central bank website; intervention decision; valuation change; Exchange rates; Real effective exchange rates; Africa; Global; A. intervention data quality; FX intervention data robustness; determinants of FX intervention; depreciation pressure (search for similar items in EconPapers)
Pages: 28
Date: 2013-03-15
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Citations: View citations in EconPapers (8)

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