Dread of Depreciation: Measuring Real Exchange Rate Interventions

Jayasri Dutta

No 2002/063, IMF Working Papers from International Monetary Fund

Abstract: We specify an empirical framework to detect the effects of official intervention on real exchange rate dynamics. Using data for 27 advanced and emerging market economies, we find evidence that interventions are a near-universal practice; almost all countries intervene when real exchange rates depreciate; interventions reduce the degree of persistence in real exchange rates; and the defense of an overvalued currency tends to be contractionary.

Keywords: WP; nominal exchange rate; critical value; least squares; Real exchange rates; interventions; parity conditions; disconnect puzzle; exchange rate intervention; exchange rate misalignment; mean reversion; level of significance; exchange rate dynamics; Exchange rates; Purchasing power parity; Real effective exchange rates; Emerging and frontier financial markets; Africa (search for similar items in EconPapers)
Pages: 36
Date: 2002-04-01
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Citations: View citations in EconPapers (28)

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