Sterilized Foreign Exchange Intervention
If the federal reserve buys dollars in the foreign exchange market but does not sterilize the interventions, w
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If the federal reserve buys dollars in the foreign exchange market but does not sterilize the interventions, what will be the impact on international reserves, the money supply, and the exchange rate
If the federal reserve buys dollars in the foreign exchange market but does not sterilize the interventions, the international reserves of the US ( assuming that the Fed does not spend the freign exchange bought, it has to keep them as foreign exchange reserves held abroad) will increase, the money supply will increase (as the Fed buys the foreign exchange, it will create money by first creating excess reserves of banks with the Fed and then the money multiplier process operates to create credit and deposits), and the exchange rate will fall ( as the Fed has mopped up a part of the foreign exchange supply in the market)..
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A fiscal theory of the currency risk premium and of sterilized intervention (IMF working paper) … |
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Is sterilized foreign exchange intervention effective after all?: An event study approach (Working paper) … |
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The effectiveness of sterilized U.S. foreign exchange intervention: An empirical study based on the noise trading approach (Research paper) … |
