## Patterns of Foreign Exchange Intervention under Inflation Targeting

_IMF Working Papers, May 29, 2020_

## Source details

**Canonical URL:** [Patterns of Foreign Exchange Intervention under Inflation Targeting](https://www.imf.org/en/publications/wp/issues/2020/05/29/patterns-of-foreign-exchange-intervention-under-inflation-targeting-49252)

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## Bibliographic details
- Authors: Gustavo Adler, Kyun Suk Chang, Zijiao Wang
- Published: May 29, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513536453.001

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### Summary and core findings
- The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT).
- Significant differences between advanced and emerging market economies:
  - Advanced economies conduct FXI limitedly and broadly symmetrically.
  - Emerging market countries use FXI pervasively and mostly asymmetrically (biased towards purchasing foreign currency, even after taking into account precautionary motives).
- Within emerging markets, the use of FXI is common both under IT and non-IT regimes.
- No evidence that FXI is used in response to inflation developments.
- Strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives.
- A higher propensity to overshoot inflation targets is found in emerging market economies where FXI is more pervasive.

### Analytical emphasis
- Focus on cross-country patterns of FXI and contrasts between advanced economies and emerging market economies.
- Attention to the interaction between inflation targeting regimes and FXI behavior.
- Examination of motives behind FXI, including precautionary motives and exchange rate objectives, and their observable implications.

### Subject and keywords (as provided)
- Subject: Exchange rate adjustments, Exchange rates, Foreign exchange, Foreign exchange intervention, Inflation, Inflation targeting, Monetary policy, Prices
- Keywords: exchange rate, Exchange rate adjustments, Exchange rates, foreign exchange, foreign exchange intervention, FXI proxy, Global, Inflation, inflation expectation, inflation objective, inflation outcome, inflation targeting, IT regime, use of FXI, WP

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2020/05/29/patterns-of-foreign-exchange-intervention-under-inflation-targeting-49252_