The effectiveness of foreign exchange intervention in Latin America: A nonlinear approach to the coordination channel

Fredy Gamboa-Estrada

Global Finance Journal, 2019, vol. 40, issue C, 13-27

Abstract: This paper examines the effectiveness of the coordination channel of foreign exchange intervention in Brazil, Chile, Colombia, Mexico, and Peru. The theoretical approach is based on a model in which traders' confidence in the fundamentals depends on exchange rate misalignments and central bank intervention. The presence of the monetary authority in the foreign exchange market may increase traders' confidence and speed up the mean reversion of the exchange rates. The empirical section of this paper is based on a Smooth Transition Regression GARCH-M model. The results suggest that foreign exchange intervention via the coordination channel has been effective over the period 2000–2013.

Keywords: Foreign exchange intervention; Coordination channel; Market microstructure; Smooth transition GARCH-M model (search for similar items in EconPapers)
JEL-codes: C10 F31 F41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1044028318300462
Full text for ScienceDirect subscribers only

Related works:
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:eee:glofin:v:40:y:2019:i:c:p:13-27

DOI: 10.1016/j.gfj.2018.11.004

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().