The Effectiveness of Futures-based Foreign Exchange Intervention: Comparative Studies of Brazil and India

Ferry Syarifuddin and Syahid Izzulhaq

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the effectiveness of futures-based foreign exchange (FX) intervention in determining the exchange rate dynamics and exchange rate pass-through effect. We specifically compare the case of Brazil and India to evaluate and take a lesson learned from those countries’ policy designs and outcomes in utilizing the futures-based FX intervention. By utilizing autoregressive and distributed lag estimations, our empirical results show that the futures-based FX interventions in Brazil are effective in determining the exchange rate movement and reducing exchange rate pass-through, while the futures-based intervention in India is neutral. The results are also confirmed in the robustness checks estimations. The finding implies that the effectiveness of futures-based FX intervention is related to the economic-institutional aspects within these countries, which also suggests that an effective futures-based FX intervention occurs only under specific circumstances.

Keywords: Foreign Exchange Intervention; Futures-based FX Intervention; Brazil; India (search for similar items in EconPapers)
JEL-codes: E44 E58 G28 (search for similar items in EconPapers)
Date: 2020-12-01
New Economics Papers: this item is included in nep-mac and nep-mon
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