The Relative Effectiveness of Spot and Derivatives Based Intervention: The Case of Brazil
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Summary:
This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.
Series:
Working Paper No. 2017/011
Subject:
Currency swaps Exchange rate adjustments Exchange rates Financial institutions Foreign exchange Futures
English
Publication Date:
January 24, 2017
ISBN/ISSN:
9781475571035/1018-5941
Stock No:
WPIEA2017011
Pages:
35
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