Motives and Effectiveness of Forex Interventions: Evidence from Peru

December 12, 2014

Preview Citation

Format: Chicago

Melesse Tashu. Motives and Effectiveness of Forex Interventions: Evidence from Peru, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper assesses empirically the motives and effectiveness of forex interventions in Peru. While the central bank of Peru states that its forex interventions aim only at containing excessive exchange rate volatility, the results of this paper show that, in practice, the interventions seem to have aimed at “leaning against the wind” as well. The results also show that forex sales, but not forex purchases, react to volatility, indicating asymmetry in the central bank’s reactions to episodes of appreciation and depreciation pressures. Similarly, the paper documents evidence of asymmetry in the effectiveness of forex interventions.

Subject: Balance of payments, Capital flows, Currency markets, Depreciation, Exchange rates, Financial markets, Foreign exchange, National accounts

Keywords: Capital flows, Characterization FX, Currency markets, Data availability, Depreciation, Exchange rate volatility, Exchange rates, FX intervention, FX pressure, FX purchase, FX sale, FX volatility, Global, Reaction function, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/217
Stock No:

WPIEA2014217
ISBN:

9781484340189
ISSN:

1018-5941

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