Foreign Exchange Intervention in Developing and Transition Economies: Results of a Survey

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Based on evidence obtained from the IMF's 2001 Survey on Foreign Exchange Market Organization, the author argues that, for several reasons, some central banks in developing and transition economies may be able to conduct foreign exchange intervention more effectively than the central banks of developed countries issuing the major international currencies.First, these central banks do not always fully sterilize their foreign exchange interventions.In addition, they issue regulations and conduct their foreign exchange operations in a way that increases the central bank's information advantage and the size of their foreign exchange intervention relative to foreign exchange market turnover.Some of the central banks also use moral suasion to support their foreign exchange interventions.