Sekou Metiki (Kiel Institute)
While the world economy may become less integrated, official reserves are still increasing. Are these reserves intended for potential FX interventions? We develop the concept of intervention readiness, i.e., holding reserves in forms that can be easily used for FX interventions. Analyzing the structure of reserve holdings, we find high readiness for FX interventions in emerging economies but less for advanced economies. The readiness indicators are well able to explain and even predict actual FX interventions. Thus, readiness seems to reflect policy decisions to use reserves for intervention purposes, and that stance has not declined over the last 15 years.
Tobias Heidland (Kiel Institute) – Lukas Menkhoff (DIW, Berlin; Kiel Institute) – Sekou Metiki (Kiel Institute)
Lecture Hall (A-032)