PL EN


2005 | 52 | 11 | 846-872
Article title

Effectiveness of central-bank intervention on foreign-exchange markets. International experiences and theoretical considerations.

Authors
Title variants
Languages of publication
HU
Abstracts
EN
Although recent years have seen a decline in major central banks' FX market activity, such intervention has remained an active policy tool in several emerging economies and/ or countries applying inflation targeting. The paper surveys the literature on its effectiveness, presenting relevant theories and international empirical evidence and trying to identify aspects that increase effectiveness under various circumstances. Only cautious conclusions can be drawn. Central-bank intervention can be effective, mainly because FX activity by central banks can shape market expectations and influence the process of information aggregation. The effectiveness can be improved by matching objectives with appropriate intervention techniques and matching intervention strategy to circumstances in a flexible way. Intervention aiming at delivering strategic policy objectives is likely to be more efficient if pre-announced, transparent, coordinated with other central banks, and in line with macroeconomic policy. But to reach tactical objectives, central banks should conduct intervention in secret, paying heed to timing, around macro news announcements or during heavy trading volume. Central bankers should keep in mind that intervention - regardless of the chosen technique - affects the exchange rate mainly in the short or medium run. A more permanent shift in exchange rates calls for a change in fundamentals such as monetary-policy action..
Year
Volume
52
Issue
11
Pages
846-872
Physical description
Document type
ARTICLE
Contributors
author
  • M. N. Kiss, no address given, contact the journal editor
References
Document Type
Publication order reference
Identifiers
CEJSH db identifier
07HUAAAA02956008
YADDA identifier
bwmeta1.element.92037273-b45d-3f9b-95c9-f2bf2269975d
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