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on International Finance |
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Issue of 2011‒08‒22
three papers chosen by Ajay Shah National Institute of Public Finance and Policy |
| By: | AfDB |
| Date: | 2011–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:324&r=ifn |
| By: | Gustavo Adler; Camilo E Tovar Mora |
| Abstract: | This paper examines foreign exchange intervention practices and their effectiveness using a new qualitative and quantitative database for a panel of 15 economies covering 2004 - 10, with special focus on Latin America. Qualitatively, it examines institutional aspects such as declared motives, instruments employed, the use of rules versus discretion, and the degree of transparency. Quantitatively, it assesses the effectiveness of sterilized interventions in influencing the exchange rate using a two-stage IV-panel data approach to overcome endogeneity bias. Results suggest that interventions slow the pace of appreciation, but the effects decrease rapidly with the degree of capital account openness. At the same time, interventions are more effective in the context of already ‘overvalued’ exchange rates. |
| Keywords: | Central banks , Exchange markets , Exchange rates , Foreign exchange , Intervention , Latin America , Reserves , |
| Date: | 2011–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/165&r=ifn |
| By: | Ayako Saiki |
| Abstract: | The purpose of this study is to examine how monetary integration affects the exchange rate pass-through, by testing whether monetary policy convergence in the euro area led to a convergence in terms of exchange rate pass-through. We conduct a comparative study between the “experiment group” (the euro area) and the “control group” (non-euro industrial countries). We find evidence for stronger convergence of exchange rate pass-through for the euro area economies as a group, especially around the 1980s. The group of non-euro industrial countries also had conditional convergence (convergence with permanent cross-sectional heterogeneity) in exchange rate pass-through, but its cross-sectional dispersion remains substantially larger compared to the euro area. This indicates that monetary integration affects the exchange rate pass-through. This has an important policy implication for the euro area, especially for the new member countries, as their exchange rate pass-through would not remain constant or purely exogenous; it should also converge to the euro area average as they work to achieve the Maastricht Criteria. |
| Keywords: | Monetary Policy; Central Banks and Their Policies; International Monetary Arrangements and Institutions |
| JEL: | E52 E58 F33 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:308&r=ifn |