Motives and Effectiveness of Forex Interventions: Evidence from Peru

Melesse Tashu

No 2014/217, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses empirically the motives and effectiveness of forex interventions in Peru. While the central bank of Peru states that its forex interventions aim only at containing excessive exchange rate volatility, the results of this paper show that, in practice, the interventions seem to have aimed at “leaning against the wind” as well. The results also show that forex sales, but not forex purchases, react to volatility, indicating asymmetry in the central bank’s reactions to episodes of appreciation and depreciation pressures. Similarly, the paper documents evidence of asymmetry in the effectiveness of forex interventions.

Keywords: WP; FX intervention; data availability; exchange rate volatility; Capital flows; FX purchase; FX sale; FX volatility; FX pressure; characterization FX; reaction function; Exchange rates; Currency markets; Depreciation; Global (search for similar items in EconPapers)
Pages: 31
Date: 2014-12-12
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Citations: View citations in EconPapers (11)

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