## The Political Economy of Foreign Exchange Interventions

_IMF Working Papers, June 26, 2026_

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## Bibliographic details
- Authors: Kodjovi M. Eklou
- Published: June 26, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229001083.001

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### Summary
- Research question: Whether political economy factors affect Foreign Exchange Intervention (FXI) policy across countries.
- Scope: Sample of 28 countries including both advanced (AEs) and emerging (EMs) economies over the period 2000-2019.
- Central focus: Whether central banks implement FX sales (leaning against depreciations) during electoral periods.

### Key findings
- EMs with competitive elections tend to implement more and larger FX sales in the pre-electoral period compared to the post-election period.
- The pre-electoral increase in FX sales is driven by countries where political pressures on central bank governors are more prevalent.
- Monetary policy transparency has the potential to mitigate politically driven FXI during electoral periods.
- Politically motivated FX sales could hamper the ability of central banks to effectively respond to large shocks.

### Drivers and mechanisms identified
- Exchange rate movements affect the purchasing power of residents or voters and are perceived as a barometer of government performance, creating incentives to influence exchange rate valuation during elections.
- Political popularity considerations appear to motivate greater FX sales in EMs with competitive elections.
- Direct political pressures on central bank governors strengthen the link between electoral cycles and FXI behavior.

### Policy implications and recommendations
- Enhance monetary policy transparency as a tool to reduce politically driven FX interventions during electoral periods.
- Protect central bank decision-making from political pressures to preserve the ability to respond effectively to large shocks.
- Recognize the trade-off between short-term political objectives (stabilizing exchange rates pre-election) and central banks’ capacity to manage macroeconomic shocks.

### Research design notes
- Empirical focus on FX sales (leaning against depreciations) by central banks.
- Cross-country analysis covering both AEs and EMs in a 28-country sample for 2000-2019.

*The Political Economy of Foreign Exchange Interventions, Kodjovi M. Eklou, June 26, 2026*

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_Source: https://www.imf.org/en/publications/wp/issues/2026/06/26/the-political-economy-of-foreign-exchange-interventions-561614_