Foreign Exchange Intervention: A Shield Against Appreciation Winds?

By Gustavo Adler, C. Mora. Social Science Research Network, 2011

112 citations recorded by the source corpus.

This paper examines foreign exchange intervention practices and their effectiveness using a new qualitative and quantitative database for a panel of 15 economies covering 2004-10 with special focus on Latin America. Qualitatively, it examines institutional aspects such as declared motives, instruments employed, the use of rules versus discretion, and the degree of transparency. Quantitatively, it assesses the effectiveness of sterilized interventions in influencing the exchange rate using a two-stage IV-panel data approach to overcome endogeneity bias. Results suggest that interventions slow the pace of appreciation, but the effects decrease rapidly with the degree of capital account openness. At the same time, interventions are more effective in the context of already ‘overvalued’ exchange rates.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e00fa8ed57a395a52ac0e01cee66a745e59575a1

Citations in the corpus

• Macroeconomic Performance During Commodity Price Booms and Busts (2012, unknown): “Adler and Tovar (2011) using a panel for 15 countries find that interventions can slow the pace of appreciation, although the effect decreases rapidly with the degree of capital account openness.”
• Capital Flows and Foreign Exchange Intervention (2019, unknown): “Adler and Tovar Mora (2011) and Adler et al. (2015) provides evidence that interventions can affect the level of the exchange rate and the pace of appreciation. Although the evidence of its effectiveness is far from conclusive, it suggests that foreign exchange intervention can be a useful tool for ”