European Parliament Library

Is Central Bank Intervention Effective Under Inflation Targeting Regimes? The Case of Colombia, Herman Kamil

Abstract
Policymakers in many emerging markets are attempting to resist currency appreciation while simultaneously meeting targets for inflation. Using the recent experience of Colombia between 2004 and 2007, this paper examines the effectiveness of the Central Bank's intervention in stemming domestic currency appreciation under an inflation targeting regime. The results indicate that exchange rate intervention was effective during 2004-2006, when foreign currency purchases were undertaken during a period of monetary easing. During 2007, on the other hand, intervention was ineffective in reversing or slowing down domestic currency appreciation, as large-scale intervention became incompatible with meeting the inflation target in an overheating economy. Currency derivative markets-which have grown in depth and sophistication-played a key role in blunting the effectiveness of intervention
Table Of Contents
Contents; I. Introduction; Figures; 1. Central Bank of Colombia's Intervention Operations and Movements in the Nominal Exchange Rate; 2. Central Bank of Colombia's Intervention and Movements in the Policy Lending Rate; II. Literature Review; III. Intervention and Monetary Policies: A Tale of Two Periods; Tables; 1. Summary Statistics on Daily Central Bank Intervention in Foreign Exchange Market; IV. Empirical Strategy; V. Summary of Results; 2. Determinants of Colombia Central Bank's Daily Discretionary Intervention in FX Spot Market
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (44 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786613830999

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