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Does foreign exchange intervention signal future monetary policy?

Graciela Kaminsky () and Karen K. Lewis

No 96-7, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: A frequently cited explanation for why foreign exchange interventions affect the exchange rate is that these interventions signal future monetary policy intentions. This explanation says that central banks signal a more contractionary monetary policy in the future by buying domestic currency today. Therefore, the expectations of future tighter monetary policy make the domestic currency appreciate, even though the current monetary effects of the intervention are typically offset by central banks. Of course, this explanation presumes that central banks, in fact, back up interventions with subsequent changes in monetary policy. In this paper, the authors empirically examine this presumption.

Keywords: Foreign exchange - Law and legislation; Monetary policy (search for similar items in EconPapers)
Date: 1996
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Related works:
Journal Article: Does foreign exchange intervention signal future monetary policy? (1996) Downloads
Working Paper: Does foreign exchange intervention signal future monetary policy? (1993)
Working Paper: Does Foreign Exchange Intervention Signal Future Monetary Policy? (1993) Downloads
Working Paper: Does Foreign Exchange Intervention Signal Future Monetary Policy? (1992)
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