 Intervention and Exchange Rate Stabilization Policy in Developing CountriesMichael M. Hutchison International Finance, 2003, vol. 6, issue 1, 109-127 Abstract: Recent evidence based on event studies demonstrates the short‐run effectiveness of sterilized (non‐monetary) intervention to stabilize exchange rates. This role is especially important for developing economies where currency volatility is frequently tied to unstable market expectations, herding behaviour and contagion, rather than ‘fundamental’ macroeconomic imbalances. Intervention coordinated with several governments is more likely to succeed in moving exchange rates in the desired direction. The Chiang Mai Initiative (CMI) is a step towards greater cooperation on exchange rate management in Asia, but its main component is a limited US dollar swap agreement between Japan and developing economies and is conditional on an IMF financial package. A much stronger political, as well as economic, commitment to intervene in exchange markets than currently embodied in the CMI would be needed to reduce exchange rate volatility in the region and to ward off future speculative attacks. Greater currency stability, in turn, would give developing economies more flexibility to use monetary and fiscal policy to pursue domestic stabilization policy objectives. Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:6:y:2003:i:1:p:109-127 Ordering information: This journal article can be ordered from Access Statistics for this article International Finance is currently edited by Benn Steil More articles in International Finance from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.