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Two Models of FX Market Interventions: The Cases of Brazil and Mexico

Martin Tobal () and Renato Yslas ()
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Renato Yslas: Banco de México

Chapter 7 in Monetary Policy and Financial Stability in Latin America and the Caribbean, 2018, pp 221-257 from Centro de Estudios Monetarios Latinoamericanos, CEMLA

Abstract: This chapter empirically compares the implications of two distinct models of FX intervention, within the context of inflation targeting regimes. For this purpose, it applies the VAR methodology developed by Kim (2003) to the cases of Mexico and Brazil. Our results can be summarized in three points. First, FX interventions have had a short-lived effect on the exchange rate in both economies. Second, the Brazilian model of FX intervention entails higher inflationary costs and this result cannot be entirely explained by differences in the level of pass-through. Third, each model is associated with a different interaction between exchange rate and conventional monetary policies.

Keywords: foreign exchange intervention; exchange rate; inflation; exchange rate pass-through; monetary policy. (search for similar items in EconPapers)
JEL-codes: E31 E52 F31 (search for similar items in EconPapers)
Date: 2018
ISBN: 978-607-7734-89-5 (printed)
Note: Joint Research Program XIX Meeting of the Central Bank Researchers Network
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Related works:
Working Paper: Two Models of FX Market Interventions: The Cases of Brazil and Mexico (2016) Downloads
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