Unveiling the Effects of Foreign Exchange Interventions: Evidence from the Kyrgyz Republic

October 30, 2020

Preview Citation

Format: Chicago

Tigran Poghosyan. Unveiling the Effects of Foreign Exchange Interventions: Evidence from the Kyrgyz Republic, (USA: International Monetary Fund, 2020) accessed November 16, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper analyzes determinants and consequences of FX interventions in the Kyrgyz Republic. Most of the literature on the topic focuses on advanced and emerging economies and this paper provides new evidence from a low-income country. We find that FX interventions take place in response to movements in the exchange rate and its volatility. There is also evidence of “leaning against the wind”, which is more pronounced for relatively larger FX sales and purchases. The “leaning against the wind” is asymmetric toward FX sales and largely reflects leaning against depreciation of domestic currency. We document a varying degree of de-facto exchange rate stability despite the de-jure floating exchange rate regime. During most of the sample, the exchange rate management index was relatively low in line with the floating exchange rate regime, with the exception of the period from 2018 Q4 until the COVID-19 shock, during which the exchange rate management index was relatively high.

Subject: Currency markets, Exchange rate adjustments, Exchange rate indexes, Exchange rates, Financial markets, Foreign exchange

Keywords: Central Asia and the Caucasus, Currency markets, Exchange rate adjustments, Exchange rate change, Exchange rate indexes, Exchange rates, Foreign exchange interventions, FX intervention, FX purchase, FX sale, Kyrgyz Republic, Management index, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/219
Stock No:

WPIEA2020219
ISBN:

9781513560151
ISSN:

1018-5941

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