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The Impact of Foreign Exchange Intervention in Colombia. An Event Study Approach

Juan José Echavarría (), Luis Melo-Velandia () and Mauricio Villamizar-Villegas ()
Authors registered in the RePEc Author Service: Juan José Echavarría ()

Revista Desarrollo y Sociedad, 2014

Abstract: To date, there is still great controversy as to which exchange rate model should be used or which monetary channel should be considered, when measuring the effects of monetary policy. Since most of the literature relies on structural models to address identification problems, the validity of results largely turn on how accurate these assumptions are in describing the full extent of the economy. In this paper we compare the effects of different types of central bank intervention for the Colombian case during 2000-2012, without imposing restrictive parametric assumptions or without the need to adopt a structural model. Using an event study approach, we find that all types of interventions (international reserve accumulation options, volatility options and discretionary) have been successful according to the smoothing criterion. In particular, volatility options had the strongest effect. Results are robust when using different windows sizes and counterfactuals.

Keywords: Central bank intervention; foreign exchange intervention mechanisms; event study (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
Date: 2014
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Working Paper: The Impact of Different Types of Foreign Exchange Intervention: An Event Study Approach (2013) Downloads
Working Paper: The Impact of Different Types of Foreign Exchange Intervention: An Event Study Approach (2013) Downloads
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