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When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries†

When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries† AbstractThis paper examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and an effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication. (JEL E52, E58, F31, F33, O19, O24) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries†

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Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7715
DOI
10.1257/mac.20150317
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and an effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication. (JEL E52, E58, F31, F33, O19, O24)

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Jan 1, 2019

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