scholarly journals Does Foreign Exchange Intervention Signal Future Monetary Policy?

10.3386/w4298 ◽  
1993 ◽  
Author(s):  
Graciela Kaminsky ◽  
Karen Lewis
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Foreign Exchange Intervention

scholarly journals The Limitations of Foreign-Exchange Intervention: Lessons from Switzerland

2013 ◽  
pp. 1-6 ◽  
Author(s):  
Owen F. Humpage
Keyword(s):  
Monetary Policy ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Developed Countries ◽  
Central Banks ◽  
Recent Experience ◽  
Monetary Policies ◽  
Foreign Exchange Intervention ◽  
Monetary Authorities ◽  
National Bank

Since the mid-1990s, monetary authorities in most large developed countries have backed away from foreign-exchange intervention—buying and selling foreign currencies to influence exchange rates. Switzerland's recent experience goes a long way to illustrate why: Foreign-exchange intervention did not afford the Swiss National Bank with a means of systematically affecting the franc independent of Swiss monetary policy, and it left the Bank exposed to foreign-exchange losses. To affect exchange rates, central banks must change their monetary policies.

scholarly journals A Conceptual Model for the Integrated Policy Framework

2020 ◽  
Vol 20 (121) ◽  
Author(s):  
Suman Basu ◽  
Emine Boz ◽  
Gita Gopinath ◽  
Francisco Roch ◽  
Filiz Unsal
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Policy Framework ◽  
Optimal Monetary Policy ◽  
Foreign Exchange Intervention ◽  
New Instrument ◽  
Country Characteristics ◽  
Integrated Policy ◽  
The Right ◽  
Currency Mismatches

In the Mundell-Fleming framework, standard monetary policy and exchange rate flexibility fully insulate economies from shocks. However, that framework abstracts from many real world imperfections, and countries often resort to unconventional policies to cope with shocks, such as COVID-19. This paper develops a model of optimal monetary policy, capital controls, foreign exchange intervention, and macroprudential policy. It incorporates many shocks and allows countries to differ across the currency of trade invoicing, degree of currency mismatches, tightness of external and domestic borrowing constraints, and depth of foreign exchange markets. The analysis maps these shocks and country characteristics to optimal policies, and yields several principles. If an additional instrument becomes available, it should not necessarily be deployed because it may not be the right tool to address the imperfection at hand. The use of a new instrument can lead to more or less use of others as instruments interact in non-trivial ways.

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