The Effects of Intraday Foreign Exchange Market Operations in Latin America: Results for Chile, Colombia, Mexico and Peru

48 Pages Posted: 12 Sep 2014

See all articles by Miguel Fuentes

Miguel Fuentes

Pontificia Universidad Católica de Chile - Institute of Economics

Pablo M. Pincheira

Adolfo Ibanez University - School of Business

Juan Manuel Julio

Bank of the Republic; Universidad Nacional de Colombia

Hernan Rincon

Banco de la República

Santiago García-Verdú

Banco de México

Miguel Zerecero

University of California, Irvine

Marco Vega

Central Reserve Bank of Peru

Erick Lahura

Central Bank of Peru

Ramon Moreno

Self employed

Date Written: September 2014

Abstract

This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and non-intervention days are first compared, and then event study regressions are used to estimate the impact of intervention (and macro surprises) on exchange rate returns and exchange rate volatility as well as on foreign exchange market turnover (in Colombia). In general, the results suggest that the impact of both non-discretionary and discretionary operations is at times significant but transitory. However, an analysis of Chile's experience suggests that the announcement effects of even non-discretionary programmes may be significant and persistent.

Keywords: Exchange rate, central bank intervention, microstructure

JEL Classification: E58, F31, G14

Suggested Citation

Fuentes, Miguel and Pincheira, Pablo M. and Julio, Juan Manuel and Rincón, Hernán and García-Verdú, Santiago and Zerecero, Miguel and Vega, Marco Antonio and Lahura, Erick and Moreno, Ramon, The Effects of Intraday Foreign Exchange Market Operations in Latin America: Results for Chile, Colombia, Mexico and Peru (September 2014). BIS Working Paper No. 462, Available at SSRN: https://ssrn.com/abstract=2495031

Miguel Fuentes (Contact Author)

Pontificia Universidad Católica de Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

Pablo M. Pincheira

Adolfo Ibanez University - School of Business ( email )

Diagonal Las Torres 2640
Peñalolén
Santiago
Chile

Juan Manuel Julio

Bank of the Republic ( email )

Carrera 7 #14-78
Bogota
Colombia

HOME PAGE: http://www.banrep.gov.co

Universidad Nacional de Colombia ( email )

Carrera 30 45-03
Bogota, None
Colombia

HOME PAGE: http://www.unal.edu.co

Hernán Rincón

Banco de la República ( email )

Carrera 7 No. 14-78, Piso 11
Bogota, Cundinamarca 111711
Colombia
+571 343 1164 (Phone)
+571 342 1804 (Fax)

Santiago García-Verdú

Banco de México

Av. 5 de Mayo No. 6
Col. Centro, Deleg. Cuauhtémoc
Ciudad de México, DF, 06059
Mexico

Miguel Zerecero

University of California, Irvine ( email )

3151 Social Science Plaza A University of Califor
Irvine, CA 92617
United States

Marco Antonio Vega

Central Reserve Bank of Peru ( email )

Jirón Miroquesada 441
Lima, Lima Lima 1
Peru

HOME PAGE: http://www.bcrp.gob.pe/

Erick Lahura

Central Bank of Peru ( email )

Jirón Miroquesada 441
Lima, Lima 1
Peru

Ramon Moreno

Self employed ( email )

Basel
Switzerland

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