Unveiling the Effects of Foreign Exchange Interventions: Evidence from the Kyrgyz Republic

31 Pages Posted: 8 Dec 2020

See all articles by Tigran Poghosyan

Tigran Poghosyan

International Monetary Fund (IMF)

Date Written: October 2020

Abstract

This paper analyzes determinants and consequences of FX interventions in the Kyrgyz Republic. Most of the literature on the topic focuses on advanced and emerging economies and this paper provides new evidence from a low-income country. We find that FX interventions take place in response to movements in the exchange rate and its volatility. There is also evidence of 'leaning against the wind', which is more pronounced for relatively larger FX sales and purchases. The 'leaning against the wind' is asymmetric toward FX sales and largely reflects leaning against depreciation of domestic currency. We document a varying degree of de-facto exchange rate stability despite the de-jure floating exchange rate regime. During most of the sample, the exchange rate management index was relatively low in line with the floating exchange rate regime, with the exception of the period from 2018 Q4 until the COVID-19 shock, during which the exchange rate management index was relatively high.

JEL Classification: E58, F31, G14, G15

Suggested Citation

Poghosyan, Tigran, Unveiling the Effects of Foreign Exchange Interventions: Evidence from the Kyrgyz Republic (October 2020). IMF Working Paper No. 2020/219, Available at SSRN: https://ssrn.com/abstract=3744686

Tigran Poghosyan (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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