Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets

March 15, 2013

Preview Citation

Format: Chicago

Matthew S Malloy. Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets, (USA: International Monetary Fund, 2013) accessed December 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

Using panel data for 15 economies from 2001-12, I identify determinants of central bank foreign exchange intervention in emerging markets (“EMs”) with flexible to moderately managed exchange rates. Similar to other studies, I find that central banks tend to “lean against the wind,” buying/selling more foreign exchange in response to greater short-run and medium-run appreciation/depreciation pressures. The panel structure provides a framework to test whether other macroeconomic variables influence the different rates of reserve accumulation between economies. In testing other variables, I find evidence of both precautionary and external competitiveness motives for reserve accumulation.

Subject: Central banks, Exchange rates, Foreign exchange, Foreign exchange intervention, International reserves, Real effective exchange rates

Keywords: A. intervention data quality, Adequacy dummy, Africa, Central bank, Central bank website, Depreciation pressure, Determinants of FX intervention, Exchange rate, Exchange rates, Foreign exchange intervention, FX intervention, FX intervention data robustness, Global, International reserves, Intervention, Intervention data, Intervention decision, O r, Real effective exchange rates, Reserve, Valuation change, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/070
Stock No:

WPIEA2013070
ISBN:

9781475532814
ISSN:

1018-5941

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