How to Move the Exchange Rate If You Must : The Diverse Practice of Foreign Exchange Intervention by Central Banks and a Proposal for Doing It Better

Basu, Kaushik ; Varoudakis, Aristomene

World Bank, Washington, DC

关键词: ACCUMULATION OF RESERVES;    ADVANCED ECONOMIES;    ADVANCED ECONOMY;    ARBITRAGE;    ASSET POSITIONS;   

DOI  :  10.1596/1813-9450-6460
RP-ID  :  WPS6460

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The paper is about the art of exchangerate management by central banks. It begins by reviewing thediversity of objectives and practices of central bankintervention in the foreign exchange market. Central bankstypically exercise discretion in determining when and towhat extent to intervene. Some central banks use publiclydeclared rules of intervention, with the aim of increasingvisibility and strengthening the signaling channel ofpolicy. There is tentative evidence that the volatility offoreign exchange reserves is comparatively lower in emergingmarket economies where central banks follow some form ofrules-based foreign exchange intervention. The paper goes onto argue that when the foreign exchange market includes somelarge strategic participants, the central bank can achievesuperior outcomes if intervention takes the form of a rule,or "schedule," indicating commitments to buyingand selling different quantities of foreign currencyconditional on the exchange rate. Exchange rate managementand reserve management can then be treated as twoindependent objectives by the central bank. In line with thestylized facts reviewed, this would enable a central bank topursue exchange rate objectives with minimum reservechanges, or achieve reserve targets with minimum impact onthe exchange rate.