Patterns of foreign exchange intervention under inflation targeting

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 (AEs) and emerging market economies (EMEs). The former group conduct FXI limite...

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Autores principales:	Gustavo Adler, Kyun Suk Chang, Zijiao Wang
Formato:	article
Lenguaje:	EN
Publicado:	Elsevier 2021
Materias:	Inflation targeting Foreign exchange intervention Exchange rate Banking HG1501-3550
Acceso en línea:	https://doaj.org/article/3ab7cce180864a5699dd23160b0979b7
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spelling	oai:doaj.org-article:3ab7cce180864a5699dd23160b0979b72021-11-16T04:11:28ZPatterns of foreign exchange intervention under inflation targeting2666-143810.1016/j.latcb.2021.100045https://doaj.org/article/3ab7cce180864a5699dd23160b0979b72021-12-01T00:00:00Zhttp://www.sciencedirect.com/science/article/pii/S2666143821000259https://doaj.org/toc/2666-1438The 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 (AEs) and emerging market economies (EMEs). The former group conduct FXI limitedly and broadly symmetrically, while the use of this policy instrument in EMEs is pervasive and mostly asymmetric, with a bias toward purchasing foreign currency, even after taking precautionary motives into account. Within emerging markets, the use of FXI is common under both IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while strong evidence exists that FXI responds to exchange rate movements, indicating that IT central banks in EMEs have dual inflation/exchange-rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies in which FXI is more pervasive.Gustavo AdlerKyun Suk ChangZijiao WangElsevierarticleInflation targetingForeign exchange interventionExchange rateBankingHG1501-3550ENLatin American Journal of Central Banking, Vol 2, Iss 4, Pp 100045- (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Inflation targeting Foreign exchange intervention Exchange rate Banking HG1501-3550
spellingShingle	Inflation targeting Foreign exchange intervention Exchange rate Banking HG1501-3550 Gustavo Adler Kyun Suk Chang Zijiao Wang Patterns of foreign exchange intervention under inflation targeting
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 (AEs) and emerging market economies (EMEs). The former group conduct FXI limitedly and broadly symmetrically, while the use of this policy instrument in EMEs is pervasive and mostly asymmetric, with a bias toward purchasing foreign currency, even after taking precautionary motives into account. Within emerging markets, the use of FXI is common under both IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while strong evidence exists that FXI responds to exchange rate movements, indicating that IT central banks in EMEs have dual inflation/exchange-rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies in which FXI is more pervasive.
format	article
author	Gustavo Adler Kyun Suk Chang Zijiao Wang
author_facet	Gustavo Adler Kyun Suk Chang Zijiao Wang
author_sort	Gustavo Adler
title	Patterns of foreign exchange intervention under inflation targeting
title_short	Patterns of foreign exchange intervention under inflation targeting
title_full	Patterns of foreign exchange intervention under inflation targeting
title_fullStr	Patterns of foreign exchange intervention under inflation targeting
title_full_unstemmed	Patterns of foreign exchange intervention under inflation targeting
title_sort	patterns of foreign exchange intervention under inflation targeting
publisher	Elsevier
publishDate	2021
url	https://doaj.org/article/3ab7cce180864a5699dd23160b0979b7
work_keys_str_mv	AT gustavoadler patternsofforeignexchangeinterventionunderinflationtargeting AT kyunsukchang patternsofforeignexchangeinterventionunderinflationtargeting AT zijiaowang patternsofforeignexchangeinterventionunderinflationtargeting
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Patterns of foreign exchange intervention under inflation targeting

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