How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?

Intervention operations in the foreign exchange market are used by the Banco Central de Reserva del Peru to manage both the level and volatility of their exchange rates. The Banco Central de Reserva del Peru provides information to the market about...

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Main Author:	Mundaca, B. Gabriela
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADVERSE SELECTION ASSET HOLDINGS ASYMMETRIC INFORMATION AVERAGE EXCHANGE RATE BALANCE SHEETS BAND REGIMES BID CAPITAL MARKET CENTRAL BANK CENTRAL BANKS COMMERCIAL BANKS COORDINATION FAILURES CURRENCY DEPENDENT VARIABLE DEPENDENT VARIABLES DEPOSITS DEPRECIATION DEPRECIATIONS DERIVATIVES DEVELOPMENT ECONOMICS DISCOUNT RATE DOMESTIC CURRENCY DUMMY VARIABLES ECONOMIC REVIEW ECONOMIES OF SCALE EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ERROR TERMS EXCHANGE RATE EXCHANGE RATE BAND EXCHANGE RATE DATA EXCHANGE RATE LEVEL EXCHANGE RATE RISK EXCHANGE RATE RISKS EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXPLANATORY VARIABLES FINANCIAL CRISIS FINANCIAL DOLLARIZATION FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL STUDIES FLEXIBLE EXCHANGE RATE FOREIGN CURRENCY FOREIGN CURRENCY LIABILITIES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKET INTERVENTION FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE TRANSACTIONS FOREIGN RESERVES FOREIGN TRADE GOVERNMENT INTERVENTIONS HIGH VOLATILITY INFLATION INFLATION TARGET INFLATION TARGETING INFLATION TARGETING FRAMEWORK INFLATION TARGETING REGIME INFORMATION ASYMMETRY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL MONEY INTERNATIONAL RESERVES INTERNATIONAL SETTLEMENTS INTERNATIONAL TRADE LIQUIDITY LIQUIDITY RISKS LONG-TERM INSTRUMENTS MARKET EXPECTATIONS MARKET PARTICIPANT MARKET PARTICIPANTS MATURITIES MONETARY AUTHORITIES MONETARY POLICIES MONETARY POLICY MONETARY POLICY REGIMES NEGATIVE SHOCKS NOMINAL ANCHOR OPTIMAL INTERVENTION POLICY CREDIBILITY POLICY RESEARCH PRIVATE SECTOR PUBLIC DEBT RANDOM DISTURBANCES RANDOM WALK REPUTATION RESERVES RETURNS STANDARD DEVIATION STORE OF VALUE TRANSACTIONS COSTS UNCERTAINTY VOLATILITY YIELD CURVE
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110228103637 http://hdl.handle.net/10986/3345

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recordtype	oai_dc
spelling	okr-10986-33452021-04-23T14:02:09Z How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility? Mundaca, B. Gabriela ADVERSE SELECTION ASSET HOLDINGS ASYMMETRIC INFORMATION AVERAGE EXCHANGE RATE BALANCE SHEETS BAND REGIMES BID CAPITAL MARKET CENTRAL BANK CENTRAL BANKS COMMERCIAL BANKS COORDINATION FAILURES CURRENCY DEPENDENT VARIABLE DEPENDENT VARIABLES DEPOSITS DEPRECIATION DEPRECIATIONS DERIVATIVES DEVELOPMENT ECONOMICS DISCOUNT RATE DOMESTIC CURRENCY DUMMY VARIABLES ECONOMIC REVIEW ECONOMIES OF SCALE EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ERROR TERMS EXCHANGE RATE EXCHANGE RATE BAND EXCHANGE RATE DATA EXCHANGE RATE LEVEL EXCHANGE RATE RISK EXCHANGE RATE RISKS EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXPLANATORY VARIABLES FINANCIAL CRISIS FINANCIAL DOLLARIZATION FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL STUDIES FLEXIBLE EXCHANGE RATE FOREIGN CURRENCY FOREIGN CURRENCY LIABILITIES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKET INTERVENTION FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE TRANSACTIONS FOREIGN RESERVES FOREIGN TRADE GOVERNMENT INTERVENTIONS HIGH VOLATILITY INFLATION INFLATION TARGET INFLATION TARGETING INFLATION TARGETING FRAMEWORK INFLATION TARGETING REGIME INFORMATION ASYMMETRY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL MONEY INTERNATIONAL RESERVES INTERNATIONAL SETTLEMENTS INTERNATIONAL TRADE LIQUIDITY LIQUIDITY RISKS LONG-TERM INSTRUMENTS MARKET EXPECTATIONS MARKET PARTICIPANT MARKET PARTICIPANTS MATURITIES MONETARY AUTHORITIES MONETARY POLICIES MONETARY POLICY MONETARY POLICY REGIMES NEGATIVE SHOCKS NOMINAL ANCHOR OPTIMAL INTERVENTION POLICY CREDIBILITY POLICY RESEARCH PRIVATE SECTOR PUBLIC DEBT RANDOM DISTURBANCES RANDOM WALK REPUTATION RESERVES RETURNS STANDARD DEVIATION STORE OF VALUE TRANSACTIONS COSTS UNCERTAINTY VOLATILITY YIELD CURVE Intervention operations in the foreign exchange market are used by the Banco Central de Reserva del Peru to manage both the level and volatility of their exchange rates. The Banco Central de Reserva del Peru provides information to the market about the specific hours of the day interventions would take place and the total amount of intervention. It consistently buys and sells on the foreign exchange market to avoid large appreciations and depreciations of the Peruvian nuevo sol against the U.S. dollar (Sol/USD), respectively. The estimates in this paper indicate that past information on interventions has moved the sol in the intended direction but only during the time the Banco Central de Reserva del Peru has announced it would be active in the foreign exchange market. The authors also find that the expectation of future interventions by the Banco Central de Reserva del Peru decreases the volatility of the sol when it intervenes to avoid an appreciation of the sol; however, the opposite occurs when the intervention takes place to defend the sol from depreciation. Indeed, the sol has been less volatile during periods when the Banco Central de Reserva del Peru has intervened than otherwise. 2012-03-19T18:00:43Z 2012-03-19T18:00:43Z 2011-02-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110228103637 http://hdl.handle.net/10986/3345 English Policy Research working paper ; no. WPS 5579 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Latin America & Caribbean Latin America & Caribbean South America America Peru
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ADVERSE SELECTION ASSET HOLDINGS ASYMMETRIC INFORMATION AVERAGE EXCHANGE RATE BALANCE SHEETS BAND REGIMES BID CAPITAL MARKET CENTRAL BANK CENTRAL BANKS COMMERCIAL BANKS COORDINATION FAILURES CURRENCY DEPENDENT VARIABLE DEPENDENT VARIABLES DEPOSITS DEPRECIATION DEPRECIATIONS DERIVATIVES DEVELOPMENT ECONOMICS DISCOUNT RATE DOMESTIC CURRENCY DUMMY VARIABLES ECONOMIC REVIEW ECONOMIES OF SCALE EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ERROR TERMS EXCHANGE RATE EXCHANGE RATE BAND EXCHANGE RATE DATA EXCHANGE RATE LEVEL EXCHANGE RATE RISK EXCHANGE RATE RISKS EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXPLANATORY VARIABLES FINANCIAL CRISIS FINANCIAL DOLLARIZATION FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL STUDIES FLEXIBLE EXCHANGE RATE FOREIGN CURRENCY FOREIGN CURRENCY LIABILITIES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKET INTERVENTION FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE TRANSACTIONS FOREIGN RESERVES FOREIGN TRADE GOVERNMENT INTERVENTIONS HIGH VOLATILITY INFLATION INFLATION TARGET INFLATION TARGETING INFLATION TARGETING FRAMEWORK INFLATION TARGETING REGIME INFORMATION ASYMMETRY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL MONEY INTERNATIONAL RESERVES INTERNATIONAL SETTLEMENTS INTERNATIONAL TRADE LIQUIDITY LIQUIDITY RISKS LONG-TERM INSTRUMENTS MARKET EXPECTATIONS MARKET PARTICIPANT MARKET PARTICIPANTS MATURITIES MONETARY AUTHORITIES MONETARY POLICIES MONETARY POLICY MONETARY POLICY REGIMES NEGATIVE SHOCKS NOMINAL ANCHOR OPTIMAL INTERVENTION POLICY CREDIBILITY POLICY RESEARCH PRIVATE SECTOR PUBLIC DEBT RANDOM DISTURBANCES RANDOM WALK REPUTATION RESERVES RETURNS STANDARD DEVIATION STORE OF VALUE TRANSACTIONS COSTS UNCERTAINTY VOLATILITY YIELD CURVE
spellingShingle	ADVERSE SELECTION ASSET HOLDINGS ASYMMETRIC INFORMATION AVERAGE EXCHANGE RATE BALANCE SHEETS BAND REGIMES BID CAPITAL MARKET CENTRAL BANK CENTRAL BANKS COMMERCIAL BANKS COORDINATION FAILURES CURRENCY DEPENDENT VARIABLE DEPENDENT VARIABLES DEPOSITS DEPRECIATION DEPRECIATIONS DERIVATIVES DEVELOPMENT ECONOMICS DISCOUNT RATE DOMESTIC CURRENCY DUMMY VARIABLES ECONOMIC REVIEW ECONOMIES OF SCALE EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ERROR TERMS EXCHANGE RATE EXCHANGE RATE BAND EXCHANGE RATE DATA EXCHANGE RATE LEVEL EXCHANGE RATE RISK EXCHANGE RATE RISKS EXCHANGE RATE UNCERTAINTY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXPLANATORY VARIABLES FINANCIAL CRISIS FINANCIAL DOLLARIZATION FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL STUDIES FLEXIBLE EXCHANGE RATE FOREIGN CURRENCY FOREIGN CURRENCY LIABILITIES FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKET INTERVENTION FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE TRANSACTIONS FOREIGN RESERVES FOREIGN TRADE GOVERNMENT INTERVENTIONS HIGH VOLATILITY INFLATION INFLATION TARGET INFLATION TARGETING INFLATION TARGETING FRAMEWORK INFLATION TARGETING REGIME INFORMATION ASYMMETRY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL MONEY INTERNATIONAL RESERVES INTERNATIONAL SETTLEMENTS INTERNATIONAL TRADE LIQUIDITY LIQUIDITY RISKS LONG-TERM INSTRUMENTS MARKET EXPECTATIONS MARKET PARTICIPANT MARKET PARTICIPANTS MATURITIES MONETARY AUTHORITIES MONETARY POLICIES MONETARY POLICY MONETARY POLICY REGIMES NEGATIVE SHOCKS NOMINAL ANCHOR OPTIMAL INTERVENTION POLICY CREDIBILITY POLICY RESEARCH PRIVATE SECTOR PUBLIC DEBT RANDOM DISTURBANCES RANDOM WALK REPUTATION RESERVES RETURNS STANDARD DEVIATION STORE OF VALUE TRANSACTIONS COSTS UNCERTAINTY VOLATILITY YIELD CURVE Mundaca, B. Gabriela How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
geographic_facet	Latin America & Caribbean Latin America & Caribbean South America America Peru
relation	Policy Research working paper ; no. WPS 5579
description	Intervention operations in the foreign exchange market are used by the Banco Central de Reserva del Peru to manage both the level and volatility of their exchange rates. The Banco Central de Reserva del Peru provides information to the market about the specific hours of the day interventions would take place and the total amount of intervention. It consistently buys and sells on the foreign exchange market to avoid large appreciations and depreciations of the Peruvian nuevo sol against the U.S. dollar (Sol/USD), respectively. The estimates in this paper indicate that past information on interventions has moved the sol in the intended direction but only during the time the Banco Central de Reserva del Peru has announced it would be active in the foreign exchange market. The authors also find that the expectation of future interventions by the Banco Central de Reserva del Peru decreases the volatility of the sol when it intervenes to avoid an appreciation of the sol; however, the opposite occurs when the intervention takes place to defend the sol from depreciation. Indeed, the sol has been less volatile during periods when the Banco Central de Reserva del Peru has intervened than otherwise.
format	Publications & Research :: Policy Research Working Paper
author	Mundaca, B. Gabriela
author_facet	Mundaca, B. Gabriela
author_sort	Mundaca, B. Gabriela
title	How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
title_short	How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
title_full	How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
title_fullStr	How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
title_full_unstemmed	How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?
title_sort	how does public information on central bank intervention strategies affect exchange rate volatility?
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110228103637 http://hdl.handle.net/10986/3345
_version_	1764386830243856384

How Does Public Information on Central Bank Intervention Strategies Affect Exchange Rate Volatility?

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