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The Effectiveness of Futures-based Foreign Exchange Intervention: Comparative Studies of Brazil and India

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  • Syarifuddin, Ferry
  • Izzulhaq, Syahid

Abstract

This paper examines the effectiveness of futures-based foreign exchange (FX) intervention in determining the exchange rate dynamics and exchange rate pass-through effect. We specifically compare the case of Brazil and India to evaluate and take a lesson learned from those countries’ policy designs and outcomes in utilizing the futures-based FX intervention. By utilizing autoregressive and distributed lag estimations, our empirical results show that the futures-based FX interventions in Brazil are effective in determining the exchange rate movement and reducing exchange rate pass-through, while the futures-based intervention in India is neutral. The results are also confirmed in the robustness checks estimations. The finding implies that the effectiveness of futures-based FX intervention is related to the economic-institutional aspects within these countries, which also suggests that an effective futures-based FX intervention occurs only under specific circumstances.

Suggested Citation

  • Syarifuddin, Ferry & Izzulhaq, Syahid, 2020. "The Effectiveness of Futures-based Foreign Exchange Intervention: Comparative Studies of Brazil and India," MPRA Paper 104709, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104709
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    More about this item

    Keywords

    Foreign Exchange Intervention; Futures-based FX Intervention; Brazil; India;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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