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Author: Milan Nedeljkovic Publisher: International Monetary Fund ISBN: 147557245X Category : Business & Economics Languages : en Pages : 35
Book Description
This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.
Author: Milan Nedeljkovic Publisher: International Monetary Fund ISBN: 147557245X Category : Business & Economics Languages : en Pages : 35
Book Description
This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.
Author: Milan Nedeljkovic Publisher: ISBN: Category : Languages : en Pages : 34
Book Description
This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.
Author: International Monetary Fund. Western Hemisphere Dept. Publisher: International Monetary Fund ISBN: 1475553226 Category : Business & Economics Languages : en Pages : 159
Book Description
This paper assesses the importance of financial market developments for the business cycle in Brazil. The results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward. Although some of the rise in credit growth in Brazil can be attributed to financial deepening and rising income levels, it may have implications for economic activity going forward. Cross-country evidence suggests that periods of easy financial conditions can amplify economic fluctuations and possibly lead to adverse economic outcomes. To explore the nexus between the financial cycle and business cycle, cycles are estimated using a variety of commonly-used statistical methods and with a small, semi-structural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. Financial sector developments are found to be an important source of macroeconomic fluctuations. Financial accelerator models highlight the role of credit and asset prices in shaping the business cycle.
Author: Mr.Damiano Sandri Publisher: International Monetary Fund ISBN: 1513547666 Category : Business & Economics Languages : en Pages : 24
Book Description
We analyze the profitability of FX swaps used by the central bank of Brazil to shed light on the rationale for FX intervention. We find that swaps are profitable in expectation, suggesting that FX intervention is used to stabilize the exchange rate in the face of temporary excessive movements rather than to manipulate it away from fundamental values. In line with this interpretation, we find that the scale of FX intervention responds to the degree of exchange rate misalignment relative to UIP conditions. We also document that intervention is more aggressive when there is less uncertainty about the medium-term level of the exchange rate and when the exchange rate is overvalued rather than undervalued.
Author: Gustavo Adler Publisher: International Monetary Fund ISBN: 1513566679 Category : Business & Economics Languages : en Pages : 67
Book Description
Foreign exchange intervention (FXI) is a highly debated topic. Yet, comprehensive and comparable data on FXI is hard to find. This paper provides a new dataset of FXI covering a large number of countries over the period 2000-20 at monthly and quarterly frequencies. It includes publicly available data for about 40 countries and carefully constructed proxies for 122 countries. Proxies are focused on both spot and derivative transactions that alter the central bank’s foreign currency position and account for a wide range of central bank operations, including vis-à-vis residents, the first proxy to do so to our knowledge. The paper discusses the merits of the new proxy relative to coarser measures traditionally used like the change in reserves, and potential definitional differences with published data. The paper also presents stylized facts using our newly constructed FXI proxies.
Author: Mr.Marcos d Chamon Publisher: International Monetary Fund ISBN: 1484393023 Category : Business & Economics Languages : en Pages : 320
Book Description
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.
Author: Romain Lafarguette Publisher: International Monetary Fund ISBN: 1513569406 Category : Business & Economics Languages : en Pages : 33
Book Description
This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Author: Gustavo Adler Publisher: International Monetary Fund ISBN: 1513536451 Category : Business & Economics Languages : en Pages : 29
Book Description
The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT). We find significant differences between advanced and emerging market economies, with the former group conducting FXI limitedly and broadly symmetrically, while the use of this policy instrument in emerging market countries is pervasive and mostly asymmetric (biased towards purchasing foreign currency, even after taking into account precautionary motives). Within emerging markets, the use of FXI is common both under IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while there is strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies where FXI is more pervasive.
Author: Luis I. Jacome H. Publisher: International Monetary Fund ISBN: 1513591762 Category : Business & Economics Languages : en Pages : 272
Book Description
In the wake of the 2008–09 global financial crisis, central banking and monetary policy in many corners of the world came under intense pressure and entered unchartered waters. The breadth and scale of central bank operations have been modified or expanded in unprecedented and even unimaginable ways given the circumstances. Additionally, a fundamental rethinking of central banking and its policy frameworks has been taking place. This volume reflects a multilateral effort to help close the gap in our knowledge in meeting the critical challenges presented by these significant changes, in particular, those confronting central banks in Latin America. The volume’s first section provides a panoramic overview of the policy progress made to date and the challenges that lie ahead. The related issue of spillovers and monetary independence is taken up more fully in the next section. The final section presents chapters that reexamine macroprudential and monetary policies and policy frameworks from the perspective of central bank staff members from the region.
Author: Milan Nedeljkovic
Author: Milan Nedeljkovic
Author: Milan Nedeljkovic
Author: International Monetary Fund. Western Hemisphere Dept.
Author: Mr.Damiano Sandri
Author: Gustavo Adler
Author: Mr.Marcos d Chamon
Author: Romain Lafarguette
Author: GASTON. SAHAY GELOS (RATNA.)
Author: Gustavo Adler
Author: Luis I. Jacome H.