Working Paper: NBER ID: w17984
Authors: Michael D. Bordo; Owen Humpage; Anna J. Schwartz
Abstract: Foreign-exchange operations did not end after the United States stopped its activist approach to intervention. Japan persisted in such operations, but avoided overt conflict with its monetary policy. With the on-set of the Great Recession, Switzerland has transacted in foreign exchange both for monetary and exchange-rate purposes, and key central banks have used swap facilities to extended their lender-of-last-resort functions. Developing and emerging market economies continue to intervene, but their actions may hamper the development of their own foreign-exchange markets. China's undervalued exchange rate is producing inflation and real appreciation, despite China's efforts to sterilize its reserve accumulation.
Keywords: foreign exchange; intervention; monetary policy; central banks; currency stability
JEL Codes: F31; F33; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Japan's foreign exchange interventions (F31) | effectiveness of interventions (I24) |
| Japan's foreign exchange interventions (F31) | yen-dollar exchange rate movements (F31) |
| Switzerland's unsterilized interventions (F38) | currency's value (F31) |
| establishment of swap lines (F33) | stabilization of financial markets (E44) |