The Effectiveness of Central Bank Intervention in the Foreign Exchange Markets in Selected Flexible Exchange Rate Regime Countries in the Caribbean PDF Download

Author: Dave Seerattan
Publisher:
ISBN:
Category : Caribbean Area
Languages : en
Pages : 22

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Book Description
This paper analyses the effectiveness of central bank intervention in the foreign exchange markets of floating exchange rate regime countries in the region in terms of the level and volatility of the exchange rate. The paper reviews the literature on foreign exchange market intervention, outlines the structure of the foreign exchange markets in these jurisdictions and the modus operandi of intervention by central banks in these markets and estimates the impact of intervention on target variables. Policy recommendations for best practices on intervention in these foreign exchange markets are then suggested.

Author: Roberto Pereira Guimarães
Publisher: International Monetary Fund
ISBN: 1451854641
Category : Business & Economics
Languages : en
Pages : 34

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Book Description
This paper analyzes the effects of intervention on the level and volatility of the exchange rate in Mexico and Turkey, two emerging countries that have floating exchange rate regimes. The paper finds mixed evidence on the effectiveness of intervention. In Mexico, foreign exchange sales have a small impact on the exchange rate level and raise short-term volatility, while in Turkey, intervention does not appear to affect the exchange rate level but reduces its shortterm volatility. In both cases, the findings are consistent with officially stated policy objectives, which aim to minimize the effect of intervention on the exchange rate, but cast doubt on claims that intervention is a useful tool for smoothing volatility. Although these findings cannot be generalized to other emerging markets, intervention's apparently limited effectiveness highlights the need for central banks to use their scarce foreign reserves selectively and parsimoniously.

Author: Mr.Rupert Worrell
Publisher: International Monetary Fund
ISBN: 1451845375
Category : Business & Economics
Languages : en
Pages : 35

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Book Description
The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on those relative prices. Under these circumstances, economic literature indicates that a fixed exchange rate regime is optimal, and Caribbean countries with (quasi-) currency boards have been successful in maintaining durable exchange rate pegs. Commitment to a currency board is a potentially vital step in achieving a currency union for the Caribbean.

Author: Pablo Druck
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 20

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The paper analyzes the challenges for the Eastern Caribbean Central Bank (ECCB) to be an effective lender of last resort (LOLR) as part of a modern banking crisis resolution framework. The main results from the theoretical model of the ECCB's institutional arrangement are that the majority of currency union members may veto emergency lending in the case of a member-specific shock, as such lending may endanger the stability of the currency board (by lowering the central bank's international reserves, thus raising devaluation risk). However, in the presence of contagion across countries, all currency union members have a vested interest in liquidity supply from the central bank. A key policy recommendation is that currency union members need a stronger fiscal position to continue to access international financial markets and sustain the exchange rate peg.

Author: Ilker Domaç
Publisher: World Bank Publications
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 33

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Author: Mr.Serhan Cevik
Publisher: International Monetary Fund
ISBN: 151351170X
Category : Business & Economics
Languages : en
Pages : 19

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Book Description
Monetary independence is at the core of the macroeconomic policy trilemma stating that an independent monetary policy, a fixed exchange rate and free movement of capital cannot exist at the same time. This study examines the relationship between monetary autonomy and inflation dynamics in a panel of Caribbean countries over the period 1980–2017. The empirical results show that monetary independence is a significant factor in determining inflation, even after controlling for macroeconomic developments. In other words, greater monetary policy independence, measured as a country’s ability to conduct its own monetary policy for domestic purposes independent of external monetary influences, leads to lower consumer price inflation. This relationship—robust to alternative specifications and estimation methodologies—has clear policy implications, especially for countries that maintain pegged exchange rates relative to the U.S. dollar with a critical bearing on monetary autonomy.

Author: Mr.Jonathan David Ostry
Publisher: International Monetary Fund
ISBN: 1475503628
Category : Business & Economics
Languages : en
Pages : 25

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Book Description
Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Author: International Monetary Fund. Western Hemisphere Dept.
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 27

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Book Description
Eastern Caribbean Currency Union: Selected Issues

Author: Mr.Dewitt Marston
Publisher: International Monetary Fund
ISBN: 1451851367
Category : Business & Economics
Languages : en
Pages : 32

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Book Description
This paper reviews the Jamaican experience with indirect instruments and contrasts this with the currency board type arrangements of the common currency area governed by the Eastern Caribbean Central Bank (ECCB). Reforms in Jamaica improved intermediation and banking efficiency, but a weak fiscal position and interest rate caps undermined the effectiveness of indirect instruments in attaining monetary control. The apparent stability amongst members of the currency union may mask fiscal pressures. In most Caribbean countries, problems of quasi-fiscal pressures on money supply, and disintermediation due to some regulation, are evident. Resolving these issues are necessary to facilitate the reforms being pursued.

Author: International Monetary Fund. Western Hemisphere Dept.
Publisher: International Monetary Fund
ISBN: 1498300162
Category : Business & Economics
Languages : en
Pages : 67

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Book Description
This Selected Issues paper presents a quantification of the long-term benefits of ex-ante resilient investment and insurance needs against natural disasters (ND) in Eastern Caribbean Currency Union (ECCU). Cost-benefit analysis of resilient investment based on a dynamic stochastic general equilibrium model tailored to small states and calibrated to all ECCU economies is also discussed in the paper. The model’s aggregate production function illustrates the interaction among the participating sectors and their contribution to output, ultimately informing the role of resilient investment. The study also quantifies government insurance coverage needs and costs using an empirical stochastic model that simulates NDs fiscal costs. The insurance needs are framed within the World Bank insurance layering framework. The results in this paper underscore the importance of a shift from ex-post recovery to a focus on ex-ante resilience building. Ex-ante resilient investment and insurance are key to the welfare and financial sustainability of the ECCU, given high intensity and recurrence of NDs.