We study the effect of foreign exchange intervention on the exchange rate relying on an
instrumental-variables panel approach. We find robust evidence that intervention affects the
level of the exchange rate in an economically meaningful way. A purchase of foreign currency
of 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates in
the ranges of [1.7-2.0] percent and [1.4-1.7] percent respectively. The effects are found to be
quite persistent. The paper also explores possible asymmetric effects, and whether
effectiveness depends on the depth of domestic financial markets.