Index
A
Abiad, Abdul, 13
Acosta, Jaime, 5
Adequacy of reserves accumulation (ARA), 11f, 15
Adler, Gustavo, 44, 46, 52–53, 56–57, 58, 251, 265, 266, 266n18, 266n21
Advanced economies
emerging markets and, 250
flexible exchange rates in, v
floating exchange rate of, 16
global financial crisis and, 1
portfolio balance in, 10
Akaike and Schwartz information criteria, 284
Andrade, Sandro C, 54, 55, 109
Annual Report on Exchange
Arrangements and Exchange Restrictions (AREAR), of IMF, 25–26, 27t–28t, 161n5
Appreciation
in Chile, 121
in Colombia, 135
endogeneity problem and, 44
inflation targeting and, 84
in Peru, 239t
ARA. See Adequacy of reserves accumulation
Arbitrage
CIP and, 66, 67, 68, 70n7
UIP and, 11
Archer, David, 23
AREAER. See Annual Report on Exchange Arrangements and Exchange Restrictions
Argentina
currency crisis in, 16
debt crisis in, 35, 97, 119
Uruguay and, 250n1, 252, 260
Armas, Adrian, 5
Asian financial crisis
Brazil and, 95
Chile and, 116
international reserves accumulation in, 12
Asset and Liability Management Division, at Central Bank of Costa Rica, 168
Assets
in portfolio balance, 10
prices, 12
Australia, Reserve Bank of, 65
B
Balance of payments
equilibrium, 12
forward market interventions and, 69, 71f
in Uruguay, 250n1
Banco de la República. See Colombia
Bank for International Settlements (BIS)
on Chile, 122, 128, 133
on transparency, 24n1
Bank of Canada, 25
Bank of England, 25, 250
Bank of Japan, 25, 250
Bank of Mexico, 5, 196
foreign exchange sales by, 221
transparency of, 223–24
US dollar and, 204, 208
Bank of the Republic. See Colombia
Barón, Andrea, 254
Barro, Robert J., 28
Barroso, João Barrata R. B., 3–4, 46, 54, 99, 101, 108
Basic spread
for CIP, 66n4
regression for, 76f
BCDs. See Dollar-denominated bonds
Benes, Jaromir, 10
Berganza, J. Carlos, 53
Bergara, Mario, 254, 255
Berkmen, Pelin, 13»7
Bid-ask spread, 142n14
in Mexico, 215–17, 216f, 217t
BIS. See Bank for International Settlements
Blanchard, Olivier, 13n7, 44
Bloomberg Finance L.P., 261
Branson, William H., 246n1
Brazil
capital controls in, 57
capital inflows in, 65, 98
crawling peg in, 95–97
currency crisis in, 16
de facto exchange rates in, 96t
derivatives markets in, 35
discretionary interventions in, 56, 97
dollarization in, 88, 88f
endogeneity problem in, 108
exchange rate in, 46, 94–100, 96f, 96t, 108–11, 110f
exchange rate volatility in, 53, 108
floating exchange rate in, 97, 100–108
foreign exchange intervention in, 93–112, 110f
foreign exchange sales and purchases in, 54, 65
forward market interventions in, 72–73, 73f
free-floating exchange rate in, 95
global financial crisis and, 35, 98, 104–6, 105f
hedging in, 3–4, 36
inflation targeting in, 84, 97
international reserves in, 98–99, 102–4, 104f
IVs in, 109
managed float in, 93–99, 96t
monetary policy in, 106
over-the-counter market in, 103
pegs in, 95, 97
preannounced interventions in, 56, 108–9
repos in, 3, 35
rules-based interventions in, 30
spot markets in, 109
swaps in, 17n12, 35–36, 97, 106–9
taper tantrum and, 106–8
transparency in, 25
US dollar and, 35–36, 65, 97, 98. See also Central Bank of Brazil
Bretton Woods, v
Broto, Carmen, 53–54
Bucacos, Elizabeth, 5–8
Burstein, Ariel, 100n9
c
CA. See Current account
Call options, 49t
in Colombia, 141, 141t, 148
Calvo, Guillermo, 28, 197, 209, 218, 219, 222f
Canada, Bank of, 25
Canales-Kriljenko, Jorge Ivan, 23
Cano, Rodrigo, 5
Capital controls, 56–57
Capital flows
in Colombia, 135
forward market interventions and, 68
shocks and, 18–19
UIP and, 11
in Uruguay, 250
Capital inflows
in Brazil, 65, 98
in Chile, 116
commodity super cycle and, 1
current account deficit and, 12n5
forward market interventions and, 71, 72n9
in Peru, 232
in Uruguay, 254, 260
Capital outflows
shocks and, 18
transparency of, 24–25
Cardozo, Pamela, 4
Cavallino, Paolo, 10, 227
Central Bank of Brazil, 35
forward market interventions by, 63, 65
in global financial crisis, 104–6, 105f
hedging by, 3–4
Central Bank of Chile. See Chile
Central Bank of Costa Rica, 156, 157, 160, 185
decision-making process of, 168–69, 169f
Central Bank of Paraguay, 40
Central Bank of Uruguay, 5, 249, 261
monetary policy of, 258–61
Central banks
fixed exchange rates and, 3
forward market interventions by, 63–77, 67f
inflation targeting by, v, 1, 3, 30, 80–83, 81f, 82f
international reserves accumulation by, 12–16, 15f
reaction function, 266, 269t
transparency of, 23–26. See also specific topics
Central Reserve Bank of Peru, 5, 39–40, 53n2, 228, 240, 243
certificates of deposit of, 244–45
hedging by, 234
inflation targeting by, 232–33
Certificates of deposit
in Peru, 39, 243–45
in Uruguay, 282t
Chamon, Marcos, 2, 3, 11, 53, 54, 56, 66, 109
Chang, Roberto, 10n4
Chile
appreciation in, 121
capital inflows in, 116
Codelco in, 30
commodity prices in, 58, 121
crawling peg in, 115, 116
depreciation in, 119, 120
dollarization in, 88, 88f
exchange rate in, 4, 46, 122–33, 123f, 124f, 125t–126t, 129f, 131t–133t
floating exchange rate in, 119
foreign currency liquidity in, 4
foreign exchange intervention in, 37, 115–35
foreign exchange purchases in, 54, 130–33, 131t–133t
foreign exchange sales in, 54, 120
free-floating exchange rate in, 134
hedging in, 30
inflation targeting in, 115–19, 117f, 118f
international reserves in, 117, 121, 122
nominal exchange rate in, 115, 116, 123
preannounced versus discretionary interventions in, 56
reserves-to-GDP ratio in, 14, 30, 117, 118f, 121
spot markets in, 120
swaps in, 122
transparency in, 133–34
US dollar and, 4, 37
Chiu, Priscilla, 223
Choleski factorization, 262, 268, 280f–282f
Chutasripanich, Nuttathum, 223
CIP. See Covered interest parity
Codelco, 30
Code of Good Practices, of IMF, 24n1
Colombia
appreciation in, 135
call options in, 141, 141t, 148
capital controls in, 57
capital flows in, 135
crawling band in, 156
depreciation in, 4, 38
discretionary interventions in, 4, 142–43
dollarization in, 88, 88f
exchange rate after intervention in, 46
exchange rate volatility in, 53, 139–42, 141t
financial stability in, 148
flexible exchange rate in, 37, 135, 137
floating exchange rate in, 37–38
foreign exchange intervention in, 4, 37–38, 37t, 137–52, 140f
foreign exchange liquidity in, 138
foreign exchange purchases in, 54, 146–47
foreign exchange sales in, 54, 148–49, 148f
government bonds in, 144–45
hedging in, 135
inflation targeting in, 138
international reserves in, 4, 135, 146, 146n26, 147f
policy rate in, 152
preannounced versus discretionary interventions in, 56
put options in, 139–42, 141f, 152
reserves-to-GDP ratio in, 146–47
rules-based interventions in, 38
spot markets in, 143–44
sterilization interventions in, 138, 144–46, 145f, 150t–151t
US dollar and, 37t, 138, 141, 148–49
Commodity prices
in Chile, 58, 121
in Peru, 231
shocks, 68
in Uruguay, 252
Commodity super cycle, 1
Communication. See Transparency
Consumer price index (CPI)
in Costa Rica, 158f, 161f
in Uruguay, 254
Contreras, Gabriela, 122
Convertibility risk, in Brazil, 97, 99
Costa Rica
CPI in, 158f, 161f
crawling band in, 159–60, 159n3, 160f, 169n11
crawling peg in, 155–58
depreciation in, 180–81, 197–98
discretionary interventions in, 5
dollarization in, 87, 159, 159n4, 162f, 192
endogeneity problem in, 178–80
event analysis for, 182–83, 185–86
exchange rate in, 157–61, 161f
exchange rate volatility in, 187f, 184, 185, 186–90, 186t–190t
financial stability in, 4, 174, 191
fixed exchange rates in, 157
flexible exchange rates in, 159
floating currency in, 4
floating exchange rate in, 155–92
foreign exchange intervention in, 155–92, 185t
foreign exchange purchases in, 180, 185t
foreign exchange sales in, 180, 185t
fundamentals in, 180
global financial crisis and, 159
inflation targeting in, 156, 161, 163f
interday rule in, 175–76
international reserves in, 156, 170–71, 170f, 170t, 172f, 173f
intraday rule in, 175
leaning against the wind in, 4, 156
managed float in, 160–61, 161f, 162f,
177
monetary policy in, 159–60
MONEX in, 164–68, 164n9, 165t,
166f, 171–73, 175, 178, 191, 197, 197f
nominal exchange rate in, 155, 157, 158f
nonfinancial public sector in, 171–73, 174f
OLS in, 184
over-the-counter markets in, 163–64, 164f
pegs in, 159
policy rate in, 159
portfolio balance in, 178
price stability in, 174–75
regression analysis for, 184, 186–90, 187f, 187t–190t
rules-based interventions in, 156, 175–86
spot markets in, 4, 156
transparency in, 177–78
US dollar and, 4, 157, 159. See also Central Bank of Costa Rica
Counterfactual, 71, 97n5, 109, 195, 215
Covered interest parity (CIP)
arbitrage and, 66, 67, 68, 70n7
basic spread for, 66n4
Brazil and, 65
forward market interventions and, 63–64, 70
Korea and, 65–66
spot market interventions and, 70
CPI. See Consumer price index
Crawling band
in Colombia, 156
in Costa Rica, 159–60, 159n3, 160f, 169n11
IMF on, 161n5
Crawling peg
in Brazil, 95–97
in Chile, 115, 116
in Costa Rica, 155–58
for disinflation, 83n4
in Mexico, 196
Cubero, Rodrigo, 4–5
Currency crises, 16
international reserves and, 13
Currency mismatches
exchange rate and, 17
financial stability and, 30
inflation targeting and, 3, 86–87
in Peru, 229, 234
in Uruguay, 252–53, 260
Current account (CA)
deficit, capital inflows and, 12n5
forward market interventions and, 68
spot exchange rate and, 71
Current-account-to-GDP balance, 13n8
Czech National Bank, 83
D
Das, Mitali, 13n7
DATATEC, 241
Daude, Christian, 122, 228
Debt crisis, in Argentina, 35
de Carvalho Filho, E., 44
De facto exchange rates
in Brazil, 96t
IMF on, 161, 162t
de Moraes Attuy, Guilherme, 53
Depreciation
after Asian financial crisis, 116
in Brazil, 98
in Colombia, 4, 38
in Costa Rica, 180–81, 197–98
in emerging markets, 100n9, 101
endogeneity problem and, 44
fundamentals and, 16
inflation targeting and, 3, 84
international reserves and, 14n9
in Mexico, 199, 209
in Peru, 229, 231, 232, 236, 238, 239t
shocks and, 18
in Uruguay, 250n1
of US dollar, 121
Derivatives markets
in Brazil, 35
Central Bank of Brazil and, 3
foreign exchange intervention in, 3
spot markets versus, 31–33, 31t–33t, 34f, 36f, 55–56
Direct interventions, in Uruguay, 265, 274
Discretionary interventions, 3
in Brazil, 97
in Colombia, 4, 142–43
in Costa Rica, 5
in Paraguay, 40
in Peru, 228, 243
preannounced interventions versus, 56
rules-based interventions versus, 26–30
transparency in, 25
Disinflation, crawling peg for, 83n4
Dollar-denominated bonds (BCDs), 118, 120, 130
Dollarization, 2, 5, 88, 88f
in Costa Rica, 159, 159n4, 162f, 192
inflation targeting and, 87
in Peru, 227–46, 230f
policy rate and, 161n6
in Uruguay, 253, 254n2
Domaç, Ilker, 53, 55
Dominguez, Kathryn M., 23
Dominican Republic, 88
Dornbusch, Rudiger, 9, 236
Druck, Pablo, 267n25
Dutch disease, 18
E
Early-warning-model, in emerging markets, 13
ECB. See European Central Bank
EchavarrÃa, Juan J., 54, 55–56, 149
Eichenbaum, Martin, 100n9
Electronic Stock Exchange, 261
El Niño, 231
Emerging Market Bond Index (EMBI), 252f, 261, 267
Emerging markets
advanced economies and, 250
depreciation in, 100n9, 101
early-warning-model in, 13
fixed exchange rates in, v
portfolio balance in, 10
transparency in, 25
Endogeneity problem
in Brazil, 108
in Costa Rica, 178–80
in foreign exchange intervention, 44–45, 108
in Uruguay, 265–66
England, Bank of, 25, 250
Equilibrium exchange rate, 17
long-term, 67, 67n5
shocks and, 18
Equilibrium selection channel, in Mexico, 206
Espinoza, Julio César, 181
European Central Bank (ECB), 25
Uruguay and, 250
European financial crisis
Mexico and, 201
Uruguay and, 260
Evans, Martin, 100
Event analysis, for Costa Rica, 182–83, 185–86
Excess demand, 12
Central Bank of Brazil and, 3–4
Excess supply, 12
Exchange forwards settlements, in Uruguay, 274
Exchange rate
in Brazil, 94–100, 96f, 96t, 108–11, 110f
in Chile, 4, 122–33, 123f, 124f, 125t–126t, 129f, 131t–133t
in Colombia, 4
in Costa Rica, 157–61, 161f
currency mismatches and, 17
financial stability and, 3, 16–17
foreign exchange intervention and, 3, 46–52, 47t–52t, 108–11
forward market interventions and, 70
inflation pass-through and, 17–18
inflation targeting and, v, 3, 80–83, 81f, 82f
in Mexico, 197f, 201, 207–9, 209f, 210f
monetary policy for, 142n15
in order-flow channel, 10n3
in Peru, 229, 230f, 231
portfolio balance and, 10
after shocks, 53
signaling channels and, 10
spot market interventions and, 70
UIP and, 12
in Uruguay, 251. See also specific types; specific types and topics
Exchange rate volatility, 2
in Brazil, 108
in Colombia, 139–42, 141t
in Costa Rica, 184, 185, 186–90, 186t–190t, 187f
after foreign exchange intervention, 52–54
in Guatemala, 38
inflation targeting and, 86
Kolmogorov-Smirnov Test for, 215, 217t
in Mexico, 5, 208, 213, 214f, 215, 217t
micro-structure channel and, 10n1
in Peru, 5, 53n2, 228, 233–34, 238, 241
in Uruguay, 5
Export prefinancing, in Uruguay, 251, 268–69, 274
F
Fanelli, Sebastian, 227
Faruqee, Hamid, 13n7
Fatum, Rasmus, 182
Federal Reserve, US
Brazil and, 98, 99
Mexico and, 204
quantitative easing by, 98, 99
swaps by, 105
transparency in, 25
Uruguay and, 250. See also Taper tantrum
Financial openness, 56–57
Financial stability
in Colombia, 148
in Costa Rica, 4, 174, 191
currency mismatch and, 30
exchange rate and, 3, 16–17
international reserves for, 148
in Peru, 231
in Uruguay, 254, 260
First-generation currency crisis, 13
Fiscal Responsibility Law, in Brazil, 35
Fisher’s open parity, 262
Fixed exchange rates
central banks and, 3
in Costa Rica, 157
in emerging markets, v
Fleming, J. Marcus, 9
Flexible Credit Line facility, of IMF, 223
Flexible exchange rates
in advanced economies, v
in Colombia, 37, 135, 137
in Costa Rica, 159
in Peru, 234–35
Floating currency
in Costa Rica, 4
in Uruguay, 250
Floating exchange rate
of advanced economies, 16
in Brazil, 97, 100–108
in Chile, 119
in Colombia, 37–38
in Costa Rica, 155–92
foreign exchange intervention for, 142n16
leaning against the wind and, 108
in Uruguay, 249. See also Free-floating exchange rate; Managed float
Flores, Miguel, 240
Foreign currency liquidity
in Chile, 4
in Uruguay, 260
Foreign direct investment, 68
to Uruguay, 260
Foreign Exchange Commission (FX Commission), 196–97, 196n1, 202
transparency of, 223–24
US dollar and, 208, 221
Foreign exchange intervention
in Brazil, 35–36, 93–112, 110f
capital controls and, 56–57
in Chile, 37, 115–35
in Colombia, 4, 37–38, 37t, 137–52, 140f
in Costa Rica, 155–92, 182t, 185t
duration of effects of, 54
effectiveness of, 3, 43–59, 59f
endogeneity problem in, 44–45, 108
exchange rate and, 3, 46–52, 47t–52t, 108–11
exchange rate volatility after, 52–54
financial openness and, 56–57
for floating exchange rate, 142n16
in Guatemala, 38
market conditions and, 57–58
in Mexico, 38–39, 38t, 195–224
monetary policy and, 106
in Paraguay, 40
persistence of, 45
in Peru, 39–40, 227–46, 232t, 242t
taxonomy of, 2–3, 23–41
transparency in, 23–26, 24n1
in Uruguay, 249–72, 270t, 282t. See also specific types and topics
Foreign exchange liquidity
in Colombia, 138
in Mexico, 213–15
in Peru, 229
spot markets and, 1
Foreign exchange purchases
in Chile, 130–33, 131t–133t
in Colombia, 146–47
in Costa Rica, 180, 185t
foreign exchange sales versus, 54–55
in Mexico, 196
in Peru, 231–32, 233f, 243–44, 244f
in Uruguay, 256f
of US dollars, 130–33, 131t–133t
Foreign exchange sales
in Chile, 120
in Colombia, 148–49, 148f
in Costa Rica, 180, 185t
foreign exchange purchases versus, 54–55
in Mexico, 5, 199–204, 201t, 203f, 204f, 221
in Peru, 244, 245f
Forward markets, 32, 63–77, 67f
balance of payments and, 69, 71f
CA and, 68
capital flow and, 68
capital inflows and, 71, 72n9
CIP and, 70
empirical results of, 72–73, 73f, 74f
equilibrium of, 69
exchange rate and, 70
hedging and, 68–69
NDFs and, 64n1
shocks and, 71–72
US dollar and, 68, 71
Forward pricing, 64
Frankel, Jeffrey, 13, 23
Fratzscher, Marcel, 58, 228
Free-floating exchange rate
in Brazil, 95
in Chile, 134
in Mexico, 195–224
in Peru, 235f, 237f
in Uruguay, 250n1
Fuentes, Miguel, 56, 149, 240
Fundamentals
in Costa Rica, 180
depreciation and, 16
signaling channels and, 12
FX Commission. See Foreign Exchange Commission
G
G3. See Group of Tree
Gabaix, Xavier, 10
Gallardo, Daniela, 5
GARCH. See Generalized autoregressive conditional heteroskedasticity
Garcia, Márcio, 10n4, 54, 56, 65, 72n9, 107, 109
GarcÃa-Verdú, Santiago, 57, 207, 210
GDP growth, 13n8
in shocks, 232t
Generalized autoregressive conditional heteroskedasticity (GARCH), 181
Ghosh, Atish R., 11, 66
Global financial crisis
advanced economies and, 1
Brazil and, 35, 98, 104–6, 105f
Costa Rica and, 159
interest rates in, 104
international reserves and, 13n7, 14
Mexico and, 200
Peru and, 227, 231, 232
repos in, 3
Uruguay and, 249–50
González, Andrés, 145
Gordon, David B., 28
Government bonds, 10n4
in Colombia, 144–45
in Uruguay, 253
Graña, Alberto, 5–8
Group of Tree (G3), 25
Guatemala, 38
Guidotti-Greenspan rule, 15
H
Hansen, Peter, 108
Hardy, Daniel C., 87
Hawkins, John, 13
Hedging
in Brazil, 3–4, 36
in Chile, 30
in Colombia, 135
forward market interventions and, 68–69
in Mexico, 5, 204–5, 209
in Peru, 234
transparency and, 25
Hendrick, Oscar, 2–3
Hofman, David, 3
Honduras, 88
Hong Kong Special Administrative Region, 25
Hot money, 18
Huang, Zhao, 108
Humala, Alberto, 58
Hung, Juan, 25
Hutchison, Michael M., 182
I
IBR. See Indicator interest rate
Ilzetzki, Ethan, 94, 97
IMF. See International Monetary Fund
IMF metric, for Mexico, 218–19, 221f
Impulse-response functions (IRFs), 269, 275f, 280f–282f
Indicator interest rate (IBR), 138
Indirect interventions, in Uruguay, 265, 274
Inflation pass-through, 17–18
Inflation targeting, 79–105
appreciation and, 84
in Brazil, 97
by central banks, v, 1, 3, 30
in Chile, 115–19, 117f, 118f
in Colombia, 138
in Costa Rica, 156, 161, 163f
costs of intervention, 84–85
currency mismatches and, 3, 86–87
depreciation and, 84
exchange rates for, v
foreign exchange intervention and, 3
monetary policy and, 3, 28, 80–83, 81f, 82f
in Peru, 229, 232–33, 243
transparency in, 24, 85–86
in Uruguay, 249, 250, 259–60
Instrumental variables (IVs), 109n13
in Brazil, 109
endogeneity problem and, 44
Interday rule, in Costa Rica, 175–76
Interest rates, 3, 12, 18, 33, 41
in global financial crisis, 104
IBR, 138
in Mexico, 5
short-term, 138
in Uruguay, 267n23
International Monetary Fund (IMF), 16
adequacy of reserves accumulation of, 15, 15f
ARA of, 11f, 15
AREAR of, 25–26, 27t–28t, 161n5
Brazil and, 97
Code of Good Practices of, 24n1
Colombia and, 138, 142
on crawling band, 161n5
on de facto exchange rates, 161, 162t
Flexible Credit Line facility of, 223
Mexico and, 223
Survey of Foreign Exchange Market Organization by, 23
International reserves (accumulation), 16–17
ARA, 11f, 15
in Brazil, 98–99, 102–4, 104f
broad money and, 11f
by central banks, 12–16, 15f
in Chile, 117, 121, 122
in Colombia, 4, 135, 146, 146n26, 147f
in Costa Rica, 156, 170–71, 170f, 170t, 172f, 173f
currency crises and, 13
depreciation and, 14n9
for financial stability, 148
global financial crisis and, 13n7, 14
leaning against the wind and, 3–4
in Mexico, 5, 38, 196–200, 197f, 198f, 218–19, 220f–222f
in Peru, 16n11, 229–31, 230f, 232, 235–36
as precautionary, 12–16, 15f
in Uruguay, 253. See also Reserves-to-GDP ratio
Intraday rule, in Costa Rica, 175
IRFs. See Impulse-response functions
IVs. See Instrumental variables
Izquierdo, Alejandro, 197, 209, 218, 219
J
Japan, 250
transparency in, 25
Jeanne, Olivier, 14, 197, 218, 219, 222f
Johansen test, 261
K
Kamil, Herman, 53, 58
Kaminsky, Graciela, 13
Klau, Marc, 13
Kohlscheen, Emanuel, 54, 55, 109
Kolmogorov-Smirnov Test, 215, 217t
Korea, 65–66
Kuersteiner, Guido M., 46, 54
Kydland, Finn E., 28
L
Lahura, Erick, 46, 55, 240
Lanau, Sergi, 3
Lankester, Valerie, 4–5
LarraÃn, Catalina, 4
Leaning against the wind
in Costa Rica, 4, 156
floating exchange rate and, 108
international reserve and, 3–4
in Peru, 227–28, 235f, 236, 237f, 246n1
Lehman Brothers, 121
Uruguay and, 260
Levy-Yeyati, Eduardo, 122, 228
Licandro, Gerardo, 5–8, 254«2
Lipton, David, v–vi
Liquidity. See Foreign currency liquidity; Foreign exchange liquidity
Lizondo, Saul, 13
Long-term equilibrium exchange rate, 67, 67n5
Loo-Kung, Rudy, 197, 209, 218, 219
M
M1, 259, 259«12
Maggiori, Matteo, 10
Magud, Nicolas E., 2–3
Managed float
in Brazil, 93–99, 96t
in Costa Rica, 160–61, 161f, 162f, 177
in Peru, 228–32
Markets Committee, at Central Bank of Costa Rica, 168–69
Mello, Miguel, 5–8, 254n2
Melo Velandia, Luis F., 54, 55–56, 149
Mendoza, Alfonso, 53, 55
Mexico
bid-ask spread in, 215–17, 216f, 217t
crawling peg in, 196
currency crisis in, 16
depreciation in, 199, 209
dollarization in, 88, 88f
equilibrium selection channel in, 206
exchange rate in, 46, 197f, 201, 207–9, 209f, 210f
exchange rate volatility in, 5, 53, 208, 213, 214f, 215, 217t
foreign exchange intervention in, 38–39, 38t, 195–224
foreign exchange liquidity in, 213–15
foreign exchange purchases in, 54, 196
foreign exchange sales in, 5, 54, 199–204, 201t, 203f, 204f
forward market interventions in, 72–73, 74f
free-floating exchange rate in, 195–224
global financial crisis and, 200
hedging in, 5, 204–5, 209
IMF and, 223
IMF metric for, 218–19, 221f
inflation targeting in, 84
interest rates in, 5
international reserves in, 5, 38, 196–200, 197f, 198f, 218–19, 220f–222f
NDFs in, 39, 204–5
North American Free Trade Agreement and, 28
PEMEX in, 30–31
portfolio balance in, 206
preannounced versus discretionary
interventions in, 56
put options in, 198–99, 199f, 200t
regression analysis for, 210–11
reserves-to-GDP ratio in, 218
rules-based interventions in, 5, 38–39
signaling channels in, 206
sterilization interventions in, 206
swaps in, 204
transparency in, 223–24
US dollar and, 5, 38–39, 196, 199, 199f, 200–204, 202f, 204f, 208, 221. See also Bank of Mexico
Microstructure
channel, 10n1
model, 109
Moghadam, Reza, 197, 218
Monetary and Foreign Exchange Committee, at Central Reserve Bank of Peru, 243
Monetary policy
in Brazil, 106
in Costa Rica, 159–60
for exchange rates, 142n15
foreign exchange intervention and, 106
inflation targeting and, 3, 28, 80–83, 81f, 82f
in Peru, 228, 229, 233–34, 234f, 237
transmission lag for, 83n3
in Uruguay, 252, 258–61
MONEX, in Costa Rica, 164–68, 164n9, 165t, 166f, 171–73, 175, 178, 191, 197, 197f
Money demand, in Uruguay, 260
Montoro, Carlos, 29
Moral hazards, 17
Moura, Marcelo L., 53
Mundaca, Gabriela, 54, 241
Mundell, Robert, 9
Muñoz, Evelyn, 4–5
Murcia, Andrés, 149
N
Nagengast, Arne J., 122, 228
NDFs. See Nondeliverable forwards
Nedeljkovic, Milan, 53, 54
Newey-West standard errors, 284
New Keynesian framework, UIP in, 10
Nicaragua, 88
Nominal exchange rate, 59f, 83
in Chile, 115, 116, 123
in Costa Rica, 155, 157, 158f
in Uruguay, 249, 259, 268
Nondeliverable forwards (NDFs), 32
forward market interventions and, 64n1
in Mexico, 39, 204–5
Nonfinancial public sector, in Costa Rica, 171–73, 174f
Nonsterilized interventions, in Uruguay, 255, 257f, 262, 265
North American Free Trade Agreement, 28
Nozaki, Masahiro, 87
O
Obstfeld, Maurice, 14
OECD. See Organisation for Economic Co-operation and Development
OLS. See Ordinary least squares
Operational transparency, 24
-
Options, 32. See also Call options; Put options
-
Order-flow channel, 10n1
exchange rates in, 10n3
Ordinary least squares (OLS)
in Costa Rica, 184
endogeneity problem and, 44
Organic Law, of Central Bank of Paraguay, 40
Organisation for Economic
Co-operation and Development (OECD), 181
Ortiz, Marco, 29
Ostry, Jonathan D., 11, 66, 197, 218
Over-the-counter markets
in Brazil, 103
in Costa Rica, 163–64, 164f
in Peru, 241, 242f
P
Paraguay
discretionary interventions in, 40
dollarization in, 88, 88f
foreign exchange intervention in, 40
preannounced interventions in, 40
transparency in, 25
US dollar and, 40
Payne, Richard, 181, 184
Pazarbasioglu, Ceyla, 87
Pegs
in Brazil, 95, 97
in Costa Rica, 159
in Peru, 246. See also Crawling peg
Pereira, Fatima R., 53
Pereira da Silva, Luiz, 99
Perfect capital mobility, 9
Persistence, of foreign exchange intervention, 45
Peru
appreciation in, 239t
capital inflows in, 232
certificates of deposit in, 39, 243–45
commodity prices in, 231
currency mismatches in, 229, 234
depreciation in, 229, 231, 232, 236, 238, 239t
discretionary interventions in, 228, 243
dollarization in, 87, 88, 88f, 227–46, 230f
exchange rate in, 46, 229, 230f, 231
exchange rate volatility in, 5, 53, 53n2, 228, 233–34, 238, 241
financial stability in, 231
flexible exchange rates in, 234–35
foreign exchange intervention in, 39–40, 227–46, 232t, 242t
foreign exchange liquidity in, 229
foreign exchange purchases in, 54, 231–32, 233f, 243–44, 244f
foreign exchange sales in, 54, 244, 245f
forward market interventions in, 72–73
free-floating exchange rate in, 235f, 237f
global financial crisis and, 227, 231, 232
hedging in, 234
inflation targeting in, 229, 243
international reserves in, 16n11, 229–31, 230f, 232, 235–36
leaning against the wind in, 227–28, 235f, 236, 237f, 246n1
managed float in, 228–32
monetary policy in, 228, 229, 233–34, 234f, 237
over-the-counter markets in, 241, 242f
pegs in, 246
policy rate in, 233, 234
portfolio balance in, 258
quantitative easing in, 232
risk management in, 234–36, 236t
shocks and, 235–38, 235f, 237f
signaling channels in, 258
spot exchange rate in, 238
spot markets in, 5, 244
sterilization interventions in, 228, 233, 243
swaps in, 5
taper tantrum and, 236
US dollar and, 5, 16n11, 39. See also Central Reserve Bank of Peru
Phillips, David C., 46, 54
Pincheira, Pablo, 46, 57
Pistelli, Alfredo M., 122
Policy Committee, at Central Bank of Costa Rica, 168
Policy rate
in Colombia, 152
in Costa Rica, 159
dollarization and, 161n6
inflation pass-through and, 17–18
in Peru, 233, 234
Policy transparency, 24
Portfolio balance
in advanced economies, 10
assets in, 10
in Costa Rica, 178
exchange rate and, 10
in Mexico, 206
in Peru, 258
sterilization interventions and, 10n4
Preannounced interventions, 5, 30
in Brazil, 108–9
discretionary interventions versus, 56
in Mexico, 224
in Paraguay, 40
Prescott, Edward C., 28
Price stability, 26, 31, 41
in Costa Rica, 174–75
in Uruguay, 258
Purchases. See Foreign exchange purchases
Put options
in Colombia, 139–42, 141f, 152
in Mexico, 198–99, 199f, 200t
Q
Quantitative easing
by Federal Reserve, 98, 99
in Peru, 232
Qureshi, Asad, 2–3
R
Ramos-Francia, M., 207, 210
Rancière, Romain, 14, 197, 218, 219, 222f
Rawat, Umang, 3
Reaction function, central bank, 266, 269t
Real exchange rate, 13n8
model, 279t
in Uruguay, 251
in US dollars, 267n25
Real Plan, in Brazil, 95
Rebelo, Sergio, 100n9
Regression analysis
for Costa Rica, 184, 186–90, 187f, 187t–190t
for Mexico, 210–11. See also Vector autoregression
Reinhart, Carmen, 13, 94, 97
Rennhack, Robert, 87
Repos, 32
in Brazil, 3, 35
in global financial crisis, 3
Reserve Bank of Australia, 65
Reserves-to-GDP ratio
in Chile, 14, 30, 117, 118f, 121
in Colombia, 146–47
in Mexico, 218
Reverse swaps, in Brazil, 98, 100, 107
Rincón, Hernán, 46, 53, 57
Risk management, in Peru, 234–36, 236t
Rodriguez, Diego, 145
RodrÃguez, Gabriel, 58
Rogoff, Kenneth, 28, 94, 97
Rojas, Diego, 149
Rules-based interventions, 3
in Colombia, 38
in Costa Rica, 156, 175–86
discretionary interventions versus, 26–30
in Guatemala, 38
in Mexico, 5, 38–39
Russian financial crisis, 117
Brazil and, 95
Peru and, 231
S
Saborowski, Christian, 53, 54
Sáez, Camila, 122
Sales. See Foreign exchange sales
Sales, Adriana, 99
Saravelos, George, 13
Saravia, Diego, 4
Sarno, Lucio, 23
SDRs. See Special drawing rights
Second-generation currency crisis, 13
SELIC. See Sistema Especial de Liquidacdo e Custo
Shambaugh, Jay, 14
Sheehy, Robert, 197, 218
Shek, Howard, 108
Shocks, 18–19
commodity price, 68
endogeneity problem and, 44
exchange rates after, 53
forward market interventions and, 71–72
GDP growth in, 232t
international reserves and, 16
Peru and, 5, 235–38, 235f, 237f
spot market interventions and, 71–72
Uruguay and, 250
Short-term
debt, 14, 15f
exchange rate, 86, 142
interest rates, 138
nominal interest rate, 119
Signaling channels
exchange rate and, 10
fundamentals and, 12
in Mexico, 206
in Peru, 258
Sistema Especial de Liquidacdo e Custo (SELIC), 36
Souza, Laura, 54, 56, 109
Special drawing rights (SDRs), 223
Spot exchange rate
CA and, 71
forward market interventions and, 64
in Peru, 238
regression for, 75t
UIP and, 12n6
Spot markets, 3
in Brazil, 109
in Chile, 120
CIP and, 70
in Colombia, 143–44
in Costa Rica, 4, 156
derivatives markets versus, 31–33, 31t–33t, 34f, 36f, 55–56
exchange rate and, 70
foreign exchange liquidity and, 1
in Peru, 5, 244
shocks and, 71–72
US dollar in, 66n3, 67, 104, 130
Sterilization interventions, 9–10, 10n1
in Colombia, 138, 144–46, 145f, 150t–151t
in Mexico, 206
in Peru, 228, 233, 243
portfolio balance and, 10n4
in Uruguay, 250–51, 255, 257f, 265
Stone, Mark R., 53, 56, 105
Straub, Ludwig, 227
Structural vector autoregression, 44, 54
Survey of Foreign Exchange Market Organization, by IMF, 23
Svensson, Lars, 233
Swaps, 32
in Brazil, 17n12, 35–36, 97, 99, 106–9
in Chile, 122
by Federal Reserve, 105
in Mexico, 204
in Peru, 5
reverse, in Brazil, 98, 100, 107
Switzerland, 10n2
T
Taper tantrum, 3
Brazil and, 106–8
Chile and, 30
Peru and, 236
Uruguay and, 278–79
Tapia, MatÃas, 56, 122, 130
Tashu, Melesse, 53, 55, 241
Taxonomy, of foreign exchange intervention, 2–3, 23–41
Taylor, Mark P. , 10n1, 14, 23
Taylor rule, 86
Third-generation currency crisis, 13
Time-inconsistency problem, 28
Tobal, MartÃn, 46, 54, 57
Tokman, Andrea, 56, 122, 130
Toro, Jorge, 46, 53, 57
Tovar, Camilo E., 46, 52–53, 56–57, 58, 251, 265, 266, 266n18, 266n21, 267n25
Transmission lag, for monetary policy, 83n3
Transparency (communication)
in Chile, 133–34
in Costa Rica, 177–78
in discretionary interventions, 25
in foreign exchange intervention, 23–26, 24n1
in inflation targeting, 3, 24, 85–86
in Mexico, 223–24
U
Uncovered interest parity (UIP), 9, 55
arbitrage and, 11
capital flows and, 11
exchange rate and, 12
in New Keynesian framework, 10
spot exchange rate and, 12n6
United States (US). See Federal Reserve, US; US dollar
Uruguay, 5
balance of payments in, 250n1
capital flows in, 250
capital inflows in, 254, 260
central bank reaction function for, 266, 269t
certificates of deposit in, 282t
commodity prices in, 252
CPI in, 254
currency mismatches in, 252–53, 260
depreciation in, 250n1
dollarization in, 87, 88, 88f, 253, 254n2
endogeneity problem in, 265–66
exchange rate in, 251
exchange rate volatility in, 5
financial stability in, 254, 260
floating currency in, 250
floating exchange rate in, 249
foreign currency liquidity in, 260
foreign exchange intervention in, 249–72, 270t, 282t
foreign exchange purchases in, 256f
free-floating exchange rate in, 250n1
global financial crisis and, 249–50
government bonds in, 253
inflation targeting in, 249, 250, 259–60
interest rates in, 267n23
international indicators for, 252f
international reserves in, 253
monetary policy in, 252, 258–61
price stability in, 258
real exchange rate in, 251
sterilization interventions in, 250–51, 255, 257f, 265
US dollar and, 5, 251, 252–54
VAR for, 251, 261–65, 263t–264t. See
also Central Bank of Uruguay
US. See United States
US dollar, 32
in BCDs, 118, 120, 130
Brazil and, 35–36, 65, 97, 98
Chile and, 4, 37
Colombia and, 37t, 138, 141, 148–49
Costa Rica and, 4, 157, 159
depreciation of, 121
foreign exchange purchases of, 130–33, 131t–133t
forward market interventions and, 64, 68, 71
in global financial crisis, 104–6, 105f
Korea and, 65–66
Mexico and, 5, 38–39, 196, 199, 199f, 200–204, 202f, 204f, 208, 221
Paraguay and, 40
PEMEX and, 30
Peru and, 5, 16n11, 39
real exchange rate in, 267n25
in spot markets, 66n3, 67, 104, 130
Uruguay and, 5, 251, 252–54. See also Dollarization; Taper tantrum
V
Valerio, Marco V. , 181
VAR. See Vector autoregression
Vargas, Hernando, 145
Vari, Miklos, 3
Vector autoregression (VAR)
structural, 44, 54
for Uruguay, 251, 261–65, 263t–264t
Vector error correction, 44
Vega, Marco, 5, 46, 55, 240
Ventanillas. See Over-the-counter market
Villamizar, Mauricio, 54, 55–56, 149
Villamizar-Villegas, Mauricio, 46, 53, 54, 55, 57
Vitale, Paolo, 23, 181, 184
VIX Index, 261
Volpon, Tony, 72n9, 107’
W
Walker, R. Christopher, 3, 53, 56, 105
Werner, Alejandro, 3
Wu, Tomas, 109
Y
Yasui, Yosuke, 53, 56, 105
Yetman, James, 223
Yslas, Renato, 46, 54, 57
Z
Zerecero, Miguel, 57