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Does foreign exchange intervention work?

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Published by Institute for International Economics in Washington, DC .
Written in English

Subjects:

Places:

  • United States.,
  • Germany.

Subjects:

  • Foreign exchange administration -- United States,
  • Foreign exchange administration -- Germany,
  • Monetary policy -- United States

Book details:

Edition Notes

StatementKathryn M. Dominguez, Jeffrey A. Frankel.
ContributionsFrankel, Jeffrey A.
Classifications
LC ClassificationsHG3903 .D65 1993
The Physical Object
Paginationxii, 170 p. :
Number of Pages170
ID Numbers
Open LibraryOL1395582M
ISBN 100881321044
LC Control Number93002923

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Does Foreign Exchange Intervention Work? Book Description. Following the Versailles G-7 summit of , most government officials and academic analysts downplayed the potential impact of exchange market intervention unless such intervention was permitted to affect national monetary policies. This study challenges the conventional wisdom. Frömmel et al. () state that with the intention to influence on the exchange rate changes the central bank can essentially use two instruments: foreign exchange interventions and interest. Downloadable! Following the Versailles G-7 summit of , most government officials and academic analysts downplayed the potential impact of exchange market intervention unless such intervention was permitted to affect national monetary policies. This study challenges the conventional wisdom. Using previously unavailable data on daily intervention by the US Federal Reserve and the German. is a platform for academics to share research papers.

  A foreign exchange intervention is a monetary policy tool used by a central bank. When the central bank takes an active, participatory role in influencing the monetary funds transfer rate of the.   Currency intervention is a type of monetary policy in which a country's central bank purchases or sells its own currency in the foreign exchange market to influence its value. Learn why countries choose to do this form of intervention and how it works. How does Foreign Exchange work? The Forex (FX) market is the global marketplace for trading currencies. It is decentralised – in other words, it does not operate in one particular place as stock exchanges do. Anyone who buys or sells a particular currency is accessing the Forex market. A foreign exchange gain/loss occurs when a company buys and/or sells goods and services in a foreign currency, and that currency fluctuates relative to their home currency. It can create differences in value in the monetary assets and liabilities, which must be recognized periodically until they are ultimately settled.

Using previously unavailable data on daily intervention by the US Federal Reserve and the German Bundesbank, the authors find to the contrary that even "sterilized" intervention can have an effect, especially if it is known to the markets. Implications are drawn for intervention policy and its role in the international coordination process. This book documents the effectiveness of intervention and pays special attention to the role of foreign exchange intervention policy within inflation-targeting monetary frameworks. The main lesson from Latin America's foreign exchange interventions, in the context of inflation targeting, is that the region has had a considerable degree of success. A foreign exchange intervention affects the value of a country's currency by changing domestic interest rates Any central bank policy that influences the domestic interest rate will affect the exchange rate Higher U.S. interest rates would likely result in an appreciation of the U.S. dollar. Currency intervention refers to the practice of a country’s monetary authorities buying or selling their own currency in the foreign exchange market with a view to steering its value.