By Gustavo Adler and Camilo E. Tovar
(Version in Español)
Abundant global liquidity and high exposure to capital movements have put foreign exchange intervention at center stage of the policy debate in Latin America. Although intervention is widely used, there is limited evidence about its effects on the exchange rate, and particularly in terms of slowing the pace of currency appreciation.
In the latest Regional Economic Outlook: Western Hemisphere we took a fresh look at this issue, examining intervention practices and effectiveness for a group of economies in Latin America and other regions during 2004-10. In particular, we sought to answer the following questions:
- How do Latin American countries intervene and in what respects do they differ from other economies?
- What are the rationales for these policies?
- How effective have they been in affecting the exchange rate? (more…)
Filed under: Economic outlook, International Monetary Fund, Latin America | Tagged: capital flows, currency appreciation, derivative markets, exchange rate misalignment, exchange rate regimes, exchange rates, foreign exchange intervention, intervention rules, liquidity conditions, overvalued currency, Regional Economic Outlook: Western Hemisphere, spot markets | 3 Comments »
