The views expressed in this book are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of the IMF, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.
Foreign exchange intervention is widely used as a policy tool, particularly in
emerging markets, but many facets of this tool remain limited, especially in
the context of flexible exchange rate regimes. The Latin American experience
can be informative because some of its largest countries adopted floating
exchange rate regimes and inflation targeting while continuing to intervene
in foreign exchange markets.
This edited volume reviews detailed accounts from several Latin American
countries’ central banks, and it provides insight into how and with what aim
many interventions were decided and implemented. This book documents
the effectiveness of intervention and pays special attention to the role of
foreign exchange intervention policy within inflation-targeting monetary
frameworks. The main lesson from Latin America’s foreign exchange
interventions, in the context of inflation targeting, is that the region has had
a considerable degree of success. Transparency and a clear communication
policy have been key. For economies that are not highly dollarized, rules-based
intervention helped contain financial instability and build international
reserves while preserving inflation targets. The Latin American experience can
help other countries in the design and implementation of their policies.