Effects of Foreign Exchange Intervention under Public Information: The Chilean Case

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dc.description.abstract This paper studies the effects of exchange rate interventions using daily and intraday data for Chile, from 1998 to 2003. Its main contribution is the recognition of the role played by transparency and public announcements in the success of the intervention policy, through the existence of an expectations mechanism which directly impacts the exchange rate. Three foreign exchange policy instruments are distinguished -spot, dollar denominated papers (BCD´s) and announcements- and treated as independent interventions. Time series estimations are used to capture the effect of the traditionally studied spot interventions, as well as the effects associated to the announcement channel that we propose as potentially relevant. Results show that the impact of individual interventions (spot and BCD) are extremely small and, in most cases, non-significant. Also, the importance of the hypothesized announcement mechanism is confirmed. The impact of Central Bank actions on the exchange rate´s level and trend seem to be channeled through the public announcements made by the monetary authority. The market adjusts its expectations to the information revealed through them, with the exchange rate responding accordingly. These effects occur on longer time spans than the ones suggested by the traditional literature. The negligible effect of individual interventions is also found, for the year 2001, with the use of intraday data. en
dc.title Effects of Foreign Exchange Intervention under Public Information: The Chilean Case en
dc.contributor.author Tapia, Matías
dc.contributor.author Tokman, Andrea
dc.date.accessioned 2014-11-10T23:54:52Z
dc.date.available 2014-11-10T23:54:52Z
dc.date.issued 2004-03
dc.identifier.issn 1529-7470
dc.identifier.uri http://hdl.handle.net/123456789/48724
lacea.language.supported en
dc.contributor.other Comments by Oscar Landerretche and Roberto Rigobón
dc.language.iso en
dc.publisher Brookings Institution Press
dc.subject Financial economics
dc.subject Exchange rate
dc.subject Central Bank
dc.subject Monetary policy
dc.subject Chile
dc.type Article

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