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Is Sterilized Intervention Effective? New International Evidence

Author

Listed:
  • Pierre L. Siklos

    (Wilfrid Laurier University)

  • Diana N. Weymark

    (Vanderbilt University)

Abstract

This paper applies a new measure of the effectiveness of sterilized interventions to data for 16 economies. The measure is defined as the difference between ex ante(xaEMP) and ex post exchange market pressure(xpEMP). xaEMP is calculated on the basis of a counterfactual that no intervention takes place and this is the rationally expected policy. xpEMP is the degree of exchange market pressure that remains based on the actual intervention policy in place. Based on a sample of 12 emerging markets, and Hong Kong, Korea, Japan, and Singapore, we conclude that sterilized interventions have persistent exchange rate effects. However, we also show empirically that this success also took place during a period of substantial growth in foreign exchange reserves.

Suggested Citation

  • Pierre L. Siklos & Diana N. Weymark, 2007. "Is Sterilized Intervention Effective? New International Evidence," Working Papers 142007, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:142007
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    References listed on IDEAS

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    1. Cavoli, Tony & Rajan, Ramkishen S., 2015. "Capital inflows and the interest premium problem: The effects of monetary sterilisation in selected Asian economies," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 1-18.

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    More about this item

    Keywords

    exchange market pressure; foreign exchange intervention; emerging markets;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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