Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets
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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.
Series:
Working Paper No. 2013/070
Subject:
Central banks Exchange rates Foreign exchange Foreign exchange intervention International reserves Real effective exchange rates
English
Publication Date:
March 15, 2013
ISBN/ISSN:
9781475532814/1018-5941
Stock No:
WPIEA2013070
Pages:
28
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