Reserve Management and FX Intervention in Mexico

Abstract

This note outlines Mexico’s recent experience with three closely interrelated issues. First, on the basis of a legal framework regulating transactions in foreign currency between the central bank and government entities, and preannounced market-based mechanisms, the stock of international reserves has reached adequate levels. Second, interventions have been made to restore orderly operating conditions in the FX market whenever this has been needed, with satisfactory results and consistent at all times with the free-floating exchange rate regime in place. Third, the continuous improvement of standards and practices has been instrumental in achieving the objectives set for reserve management at the Bank of Mexico (ie liquidity, capital preservation and return enhancement).

Full Publication: Reserve Management and FX Intervention

Keywords: International reserve management, FX intervention mechanisms, portfolio allocation

JEL Classification: E58, F31, G11