The Relative Effectiveness of Spot and Derivatives Based Intervention : The Case of Brazil

Author/Editor:

Milan Nedeljkovic ; Christian Saborowski

Publication Date:

January 24, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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. 17/11

Subject:

English

Publication Date:

January 24, 2017

ISBN/ISSN:

9781475571035/1018-5941

Stock No:

WPIEA2017011

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

35

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