Foreign Exchange Market Intervention in EMEs: What Has Changed?

16 Pages Posted: 5 Oct 2016

See all articles by Dietrich Domanski

Dietrich Domanski

Bank for International Settlements (BIS)

Emanuel Kohlscheen

Bank for International Settlements (BIS)

Ramon Moreno

Independent

Date Written: September 18, 2016

Abstract

Since the Great Financial Crisis, emerging market economies have been more active in FX markets. As rising dollar debt and increased exposure to global financing flows have affected the demand and supply of foreign currency, financial stability has become an increasingly important motive for interventions. Adjustments in intervention tactics and instruments are consistent with a greater importance of financial stability considerations. Timely interventions can be effective in improving FX market liquidity, and there are credibility gains from holding foreign reserve buffers in countries with low credit ratings. Since the carrying costs of holding reserves have increased, countries with higher credit ratings may have incentives to reduce the size of reserve buffers.

JEL Classification: E44, F30, F40, G10

Suggested Citation

Domanski, Dietrich and Kohlscheen, Emanuel and Moreno, Ramon, Foreign Exchange Market Intervention in EMEs: What Has Changed? (September 18, 2016). BIS Quarterly Review September 2016. Available at SSRN: https://ssrn.com/abstract=2842332

Dietrich Domanski (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Emanuel Kohlscheen

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Ramon Moreno

Independent ( email )

No Address Available

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