Perverse Effects of Non-sterilized Interventions on Spot Foreign Exchange Rates

IF 0.3 Q4 ECONOMICS

South Asian Journal of Macroeconomics and Public Finance Pub Date : 2019-05-01 DOI:10.1177/2277978719836307

Ismail Saglam

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Abstract

We study the effects of non-sterilized intervention on a spot foreign exchange (forex) rate using a multi-period game-theoretical model which involves an unspeciﬁed number of competitive traders, a ﬁnite number of strategic traders (forex dealers) with heterogenous initial money balances, and the central bank of the home country. Simulating the subgame-perfect Nash equilibrium of the two-stage game played by the forex dealers in each period, we show that the non-sterilized intervention of the central bank may lead to a perverse effect on the spot forex rate. We call the mechanism underlying this effect strategic trade switching channel that works when an increase in the central bank’s forex currency demand (supply) exerts such a big upward (downward) effect on the forex rate that some sufficiently big dealers, who optimally bought (sold) forex currency in the previous period when the forex rate was sufficiently low, ﬁnd in the current period selling (buying) it more proﬁtable, thus moving the forex rate in a direction undesired by the central bank. JEL Classiﬁcation: D43, F31, G20

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非冲销干预对即期外汇汇率的反常影响

我们使用多时期博弈论模型研究非冲销干预对即期外汇(forex)汇率的影响，该模型涉及未指定数量的竞争性交易者，有限数量的具有异质初始货币余额的战略交易者(外汇交易商)和母国中央银行。通过对外汇交易商在每一时期所进行的两阶段博弈的子博弈-完美纳什均衡的模拟，我们发现央行的非冲销干预可能会对即期汇率产生反向影响。我们将这种效应背后的机制称为战略交易转换通道，当央行外汇需求(供给)的增加对外汇汇率产生如此大的上行(下行)效应时，一些在外汇汇率足够低时买入(卖出)外汇的足够大的交易商发现，在当前时期卖出(买入)外汇更有利可图，从而使外汇汇率朝着央行不希望的方向移动。JEL分类:D43、F31、G20

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来源期刊

South Asian Journal of Macroeconomics and Public Finance ECONOMICS-

CiteScore

2.10

自引率

11.10%

发文量

期刊介绍： The purpose of the Journal is to publish (in English language) peer-reviewed articles, reviews and scholarly comments on issues relating to contemporary global macroeconomics and public finance by which is understood: The Journal is for all professionals concerned with contemporary Macroeconomics and Public Finance and is a forum for all views on related subjects. The Editorial Board welcomes articles of current interest on research and application on the areas mentioned above. The Journal will be international in the sense that it seeks research papers from authors with an international reputation and articles that are of interest to an international audience. In pursuit of the above, the journal shall: a. draw on and include high quality work from the international community of scholars including those in the major countries of Asia, Europe, Asia Pacific, the United States, other parts of the Americas and elsewhere with due representation for considerations of the readership. The Journal shall include work representing the major areas of interest in contemporary research on Macroeconomics and Public Finance and on a wide range of issues covering macro- economics, tax and fiscal issues, banking and finance, international trade, labour economics, computational and mathematical methods, etc. The Journal would particularly engage papers on pure and applied economic theory and econometric methods. b. avoid bias in favour of the interests of particular schools or directions of research or particular political or narrow disciplinary objectives to the exclusion of others. c. ensure that articles are written in a terminology and style which makes them intelligible, not merely within the context of a particular discipline or abstract mode, but across the domain of relevant disciplines.