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Macroeconomic Impact of Foreign Exchange Intervention: Some Cross-country Empirical Findings
Based on VAR analyses across 26 countries, we show that, although foreign exchange intervention (FXI) is effective in stabilizing the nominal exchange rate in the short run, its impacts on the real exchange rate are less significant: Limitations on nominal exchange rate flexibility may induce adjustments to the real exchange rate through domestic prices. We find that countries that intervene more heavily in response to external shocks experience greater general and asset price volatility, which is not conducive to countering the impact of external shocks. We show that China’s macroeconomic responses to external shocks are broadly consistent with international experiences among intervening countries. The simple methodological framework adopted in this paper is meant to examine a broad set of macroeconomic variables and bears limitations; our findings serve to motivate more structural analysis on FXI’s macroeconomic impacts going forward.
Shocks and Capital Flows
The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of co...
Cromos
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Brasil energia
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Variedades
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