The effectiveness of forex interventions in four Latin American countries

Carmen Broto

Emerging Markets Review, 2013, vol. 17, issue C, 224-240

Abstract: Many central banks actively intervene in the forex market, although there is no consensus on its impact on the exchange rate level and volatility. We analyze the effects of daily forex interventions in four Latin American economies with inflation targets – namely, Chile, Colombia, Mexico and Peru – by fitting GARCH-type models. These countries represent a broad span of intervention strategies in terms of size and frequency, ranging from pure discretional to rule-based interventions. We find that only first interventions, either isolated or the initial one in a rule-based series, are able to reduce exchange rate volatility, whereas their size plays a minor role.

Keywords: Exchange rate volatility; Foreign exchange interventions; GARCH (search for similar items in EconPapers)
JEL-codes: C54 F31 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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Working Paper: The effectiveness of forex interventions in four Latin American countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:17:y:2013:i:c:p:224-240

DOI: 10.1016/j.ememar.2013.03.003

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