Foreign Exchange Intervention in Inflation Targeters in Latin America

By Marcos d Chamon, David J Hofman, Nicolas E Magud, Alejandro M. Werner

February 28, 2019

Preview Citation

Format: Chicago

Marcos d Chamon, David J Hofman, Nicolas E Magud, and Alejandro M. Werner Foreign Exchange Intervention in Inflation Targeters in Latin America, (USA: International Monetary Fund, 2019) accessed December 22, 2024

Summary

Foreign exchange intervention is widely used as a policy tool, particularly in emerging markets, but many facets of this tool remain limited, especially in the context of flexible exchange rate regimes. The Latin American experience can be informative because some of its largest countries adopted floating exchange rate regimes and inflation targeting while continuing to intervene in foreign exchange markets. This edited volume reviews detailed accounts from several Latin American countries’ central banks, and it provides insight into how and with what aim many interventions were decided and implemented. 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. Transparency and a clear communication policy have been key. For economies that are not highly dollarized, rules-based intervention helped contain financial instability and build international reserves while preserving inflation targets. The Latin American experience can help other countries in the design and implementation of their policies.

Subject: Banking, Central banks, Currency markets, Exchange rate arrangements, Exchange rates, Financial markets, Foreign exchange, Foreign exchange intervention, International reserves

Keywords: BOOK, Caribbean, Central America, Central bank, Colombian peso, Currency markets, Dollar sale, Exchange rate, Exchange rate arrangements, Exchange rate volatility, Exchange rates, Foreign exchange, Foreign exchange intervention, Foreign exchange intervention, Global, International reserves, Intervention, Intervention policy, Spot market

Publication Details

Pages:

320
Volume:

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Books
Stock No:

FXILAEA
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