The effectiveness of currency intervention in a commodity-exporter: Evidence from Mongolia

Victor Pontines, Davaajargal Luvsannyam, Enkhjin Atarbaatar and Ulziikhutag Munkhtsetseg

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Although EME central banks actively intervene in currency markets, there is a long-running debate as to its effectiveness in affecting exchange rates. In this study, we use unique daily data on currency interventions in Mongolia to analyze the impact of these interventions on the changes in the MNT/USD exchange rate. The results indicate that currency intervention is effective in Mongolia, although it differs in certain ways. Currency sales are effective in moving changes in the MNT/USD in the correct direction, especially when carried out in larger amounts and when implemented frequently. This effect can last from one to three weeks, although we find the magnitude of the daily effect to be relatively small. We do not find evidence, however, that currency purchases are effective. These findings are comparable to the existing literature on the effectiveness of intervention in EMEs.

Keywords: Currency intervention; exchange rate; treatment effect; causal effect; local projection; Mongolia (search for similar items in EconPapers)
JEL-codes: C14 C32 E58 F31 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-03
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
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https://cama.crawford.anu.edu.au/sites/default/fil ... tar_munkhtsetseg.pdf (application/pdf)

Related works:
Working Paper: The Effectiveness of Currency Intervention in a Commodity-Exporter: Evidence from Mongolia (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-31

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