On Central Bank Interventions in the Mexican Peso/Dollar Foreign Exchange Market

Santiago Garcia-Verdu and Zerecero Miguel

No 2014-19, Working Papers from Banco de México

Abstract: In recent years the Bank of Mexico has made a series of rules-based interventions in the peso/dollar foreign exchange market. We assess the effectiveness of two specific interventions. These were the "Dollar auctions with minimum price", active between October 2008 and April 2010, and the "Dollar auctions without minimum price", implemented from March to September, 2009. Broadly speaking, the aims of these two interventions were, respectively, to provide liquidity and to promote orderly conditions in the foreign exchange market. For our analysis, we follow the framework implemented by Dominguez (2003) and Dominguez (2006), an event study microstructure approach. We use the bid-ask spreads as a measure of liquidity and, also, of orderly conditions. In general, our results show no indication of an effect in the bid-ask spread for the first intervention, and are fairly conclusive regarding a significant reduction in it for the second intervention, yet, it is important to consider the limitations of our estimation methodology.

Keywords: foreign exchange rate; central bank interventions; microstructure (search for similar items in EconPapers)
JEL-codes: E5 F31 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-mst
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: On central bank interventions in the Mexican peso/dollar foreign exchange market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2014-19

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