Foreign Exchange Intervention and Expectation in Emerging Economies

29 Pages Posted: 20 Jun 2013

See all articles by Ken Miyajima

Ken Miyajima

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: June 2013

Abstract

Using monthly data for four selected emerging economies, sterilised central bank foreign exchange intervention is found to have little systematic influence on the near-term nominal exchange rate expectations in the direction intended by the central banks. In other words, central bank dollar purchases to stem exchange rate appreciation or related exchange rate volatility are not associated with an adjustment of the near-term exchange rate forecasts in the direction of depreciation, and vice versa. This suggests intervention may not change the nearterm exchange rate expectations. Moreover, intervention may have had unintended effects in the sense that it can lead to undesired volatility in the exchange rate, which is consistent with previous studies.

Keywords: exchange rate expectation, foreign exchange intervention

JEL Classification: D83, D84, E58, F31

Suggested Citation

Miyajima, Ken, Foreign Exchange Intervention and Expectation in Emerging Economies (June 2013). BIS Working Paper No. 414, Available at SSRN: https://ssrn.com/abstract=2282408

Ken Miyajima (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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