Tech Report Number
2000-008
Abstract
Interventions in foreign exchange markets are commonly used by monetary authorities to influence exchange rates. Whether or not the interventions are symmetrical in response to external shocks representing depreciation or appreciation pressures depends on other objectives of the monetary authority. If the goal of maintaining low inflation is more important than exchange-rate stabilization, then when inflation is considered to be too high asymmetrical interventions are likely to arise with more vigorous interventions to offset depreciation pressures than to offset appreciation pressures. Evidence from Taiwan supports this pattern.
Keywords
price levels, inflation, intervention, exchange rates
Date of this Version
2000
COinS