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Is Sterilized Intervention Effective? New International Evidence

Pierre Siklos () and Diana N. Weymark
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Diana N. Weymark: Vanderbilt University

No 142007, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper applies a new measure of the effectiveness of sterilized interventions to data for 16 economies. The measure is defined as the difference between ex ante(xaEMP) and ex post exchange market pressure(xpEMP). xaEMP is calculated on the basis of a counterfactual that no intervention takes place and this is the rationally expected policy. xpEMP is the degree of exchange market pressure that remains based on the actual intervention policy in place. Based on a sample of 12 emerging markets, and Hong Kong, Korea, Japan, and Singapore, we conclude that sterilized interventions have persistent exchange rate effects. However, we also show empirically that this success also took place during a period of substantial growth in foreign exchange reserves.

Keywords: exchange market pressure; foreign exchange intervention; emerging markets (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-sea
Date: 2007-07
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