IMF Working Papers Volume 2013 Issue 070: Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets (2013)

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Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets

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Mr. Matthew S Malloy

Mr. Matthew S Malloy
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Series:: IMF Working Papers

Volume/Issue:: Volume 2013: Issue 070

Publication Date:: 15 Mar 2013

DOI:: https://doi.org/10.5089/9781475532814.001

ISBN:: 9781475532814

ISSN:: 1018-5941

Pages:: 28

Keywords:: WP; reserve; central bank; exchange rate; intervention; foreign exchange intervention; international reserves; intervention data; FX intervention; adequacy dummy; o r; central bank website; intervention decision; valuation change; Exchange rates; Real effective exchange rates; Africa; Global; A. intervention data quality; FX intervention data robustness; determinants of FX intervention; depreciation pressure

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2013: Issue 070

Language:: English

Publication Date:: 15 Mar 2013

DOI:: https://doi.org/10.5089/9781475532814.001

ISBN:: 9781475532814

ISSN:: 1018-5941

Pages:: 28

Keywords:: WP; reserve; central bank; exchange rate; intervention; foreign exchange intervention; international reserves; intervention data; FX intervention; adequacy dummy; o r; central bank website; intervention decision; valuation change; Exchange rates; Real effective exchange rates; Africa; Global; A. intervention data quality; FX intervention data robustness; determinants of FX intervention; depreciation pressure

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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Using panel data for 15 economies from 2001-12, I identify determinants of central bank foreign exchange intervention in emerging markets (“EMs”) with flexible to moderately managed exchange rates. Similar to other studies, I find that central banks tend to “lean against the wind,” buying/selling more foreign exchange in response to greater short-run and medium-run appreciation/depreciation pressures. The panel structure provides a framework to test whether other macroeconomic variables influence the different rates of reserve accumulation between economies. In testing other variables, I find evidence of both precautionary and external competitiveness motives for reserve accumulation.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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