Official Intervention in the Foreign Exchange Market: Elements of Best Practice

By Jorge I Canales Kriljenko, Cem Karacadag, Roberto Guimarães-Filho

July 1, 2003

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Format: Chicago

Jorge I Canales Kriljenko, Cem Karacadag, and Roberto Guimarães-Filho. Official Intervention in the Foreign Exchange Market: Elements of Best Practice, (USA: International Monetary Fund, 2003) accessed December 25, 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 offers guidance on the operational aspects of official intervention in the foreign exchange market, particularly in developing countries with flexible exchange rate regimes. A brief survey of the literature and country experience is followed by an analysis of the objectives, timing, amount, degree of transparency, and choice of markets and counterparties in conducting intervention. The analysis highlights the difficulty of detecting exchange rate misalignments and disorderly markets, and argues in favor of parsimony in official intervention. Determining the timing and amount of intervention is a highly subjective excercise, and some degree of discretion is almost necessary, though policy rules may serve as "rules of thumb."

Subject: Banking, Currencies, Currency markets, Exchange rates, Financial markets, Foreign exchange, Foreign exchange intervention, Money

Keywords: Africa, Currencies, Currency markets, Exchange rate policy, Exchange rates, Foreign currency, Foreign exchange intervention, Foreign exchange market, Forward market, Global, Intervention objective, Intervention policy, Market condition, Market participant, Option market intervention, Order flow, Policy signal, Price impact, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/152
Stock No:

WPIEA1522003
ISBN:

9781451857115
ISSN:

1018-5941

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