The effects of intraday foreign exchange market operations in Latin America : results for Chile, Colombia, Mexico and Peru

Abstract

This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and non-intervention days are first compared, and then event study regressions are used to estimate the impact of intervention (and macro surprises) on exchange rate returns and exchange rate volatility as well as on foreign exchange market turnover (in Colombia). In general, the results suggest that the impact of both non-discretionary and discretionary operations is at times significant but transitory. However, an analysis of Chile's experience suggests that the announcement effects of even non-discretionary programmes may be significant and persistent.

When the Walk is Not Random: Commodity Prices and Exchange Rates

“…The literature on the forward premium puzzle (Fama (1984)) has generally established that interest rate differentials have predictive power for exchange rates, yet in a manner that is inconsistent with uncovered interest parity (UIP). 17 Our carry indicator is based on the difference between the 1-year government bonds yield for the country in question and the United States. These data were obtained from Datastream.…”

On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia, 1999–2007

“…A sense of the dynamics of the impact of intervention can be obtained by comparing the coefficients on the intervention variable across different intra-day time windows. The width of the time intervals in our analysis conforms to those used in earlier studies that have analyzed foreign exchange market intervention using intra-day data (see, for example, Fuentes et al, 2014;Kohlscheen and Andrade, 2014;Lahura and Vega, 2013;Payne and Vitale, 2003;). 14 In our benchmark specification, the percentage change in the exchange rate during the interval in which the intervention occurred is regressed only on the signed total volume of intervention during the interval.…”

“…14 In earlier studies, the exchange rate variations have been measured over time intervals of varying lengths: 5 minutes (Fuentes et al, 2014 for Chile). In the study by Kohlscheen and Andrade (2014) the time window goes up to 90 minutes after the event.…”

“…In the study by Kohlscheen and Andrade (2014) the time window goes up to 90 minutes after the event. Fuentes et al (2014) also report descriptive statistics of the transactions data for the 5-minute, 20-minutes, 1-hour, 6-hours and 24-hours time intervals. 15 Adler and Tovar (2011) and also have a baseline specification in which the intervention volume is the only explanatory variable.…”

Determinantes de la tasa de cambio en Colombia : un enfoque de microestructura de mercados

“…En dicha encuesta también se encontró que los negociadores del mercado cambiario perciben que la intervención del BR afecta positivamente la volatilidad del tipo de cambio. Estos resultados también son similares a los reportados en Fuentes et al (2013) donde se analiza el efecto de la intervención en algunos países latinoamericanos.…”