Journal Article

When is foreign exchange intervention effective? Evidence from 33 countries

Authors

  • Marcel Fratzscher
  • Oliver Gloede
  • Lucio Sarno
  • Tobias Heidland
  • Lukas Menkhoff
Publication Date

This study examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and a highly effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works very well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication.

Kiel Institute Experts

Info

JEL Classification
E58, F31, F33
DOI
10.1257/mac.20150317

Key Words

  • capital controls
  • communication
  • effectiveness measures
  • exchange rate regimes
  • foreign exchange intervention