EconPapers    
Economics at your fingertips  
 

Effects of Foreign Exchange Intervention under Public Information: The Chilean Case

Matias Tapia () and Andrea Tokman ()

Economía Journal, 2004, vol. Volume 4 Number 2, issue Spring 2004, 215-256

Abstract: This paper studies the effects of exchange rate interventions using daily and intraday data for Chile, from 1998 to 2003. Its main contribution is the recognition of the role played by transparency and public announcements in the success of the intervention policy, through the existence of an expectations mechanism which directly impacts the exchange rate. Three foreign exchange policy instruments are distinguished -spot, dollar denominated papers (BCD´s) and announcements- and treated as independent interventions. Time series estimations are used to capture the effect of the traditionally studied spot interventions, as well as the effects associated to the announcement channel that we propose as potentially relevant. Results show that the impact of individual interventions (spot and BCD) are extremely small and, in most cases, non-significant. Also, the importance of the hypothesized announcement mechanism is confirmed. The impact of Central Bank actions on the exchange rate´s level and trend seem to be channeled through the public announcements made by the monetary authority. The market adjusts its expectations to the information revealed through them, with the exchange rate responding accordingly. These effects occur on longer time spans than the ones suggested by the traditional literature. The negligible effect of individual interventions is also found, for the year 2001, with the use of intraday data.

Keywords: exchange rates intervention; expetations mechanism; spot interventions; Chile (search for similar items in EconPapers)
JEL-codes: C32 G38 E58 E47 (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (48) Track citations by RSS feed

Downloads: (external link)
http://economia.lacea.org/contents.htm

Related works:
Working Paper: Effects of Foreign Exchange Intervention Under Public Information: the Chilean Case (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000425:008671

Access Statistics for this article

More articles in Economía Journal from The Latin American and Caribbean Economic Association - LACEA
Bibliographic data for series maintained by LACEA ().

 
Page updated 2019-06-12
Handle: RePEc:col:000425:008671