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Unveiling the effects of foreign exchange intervention: A panel approach

Gustavo Adler, Noëmie Lisack and Rui Mano

Emerging Markets Review, 2019, vol. 40, issue C, -

Abstract: The paper studies the effect of foreign exchange intervention on the level of the exchange rate relying on an instrumental-variable panel approach suited to assess the macroeconomic importance of such effect (i.e., beyond short-term effects found in the literature). We find robust evidence that intervention affects the exchange rate in a meaningful way from a macroeconomic perspective. A purchase of foreign currency of 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates in the ranges of [1.7–2.0] percent and [1.4–1.7] percent, respectively. The effects are found to be persistent and symmetric for FX purchases and sales.

Keywords: Foreign exchange intervention; Exchange rates; Reserves (search for similar items in EconPapers)
JEL-codes: F31 E58 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Unveiling the Effects of Foreign Exchange Intervention; A Panel Approach (2015) Downloads
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DOI: 10.1016/j.ememar.2019.100620

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