Effective sterilized foreign exchange intervention? Evidence from a rule-based policy
Guido M. Kuersteiner, David C. Phillips, and Mauricio Villamizar-Villegas
,
(
113
)
Journal of International Economics
118-138
July
2018
Abstract
This paper investigates the effectiveness of sterilized foreign exchange interventions by exploiting a discontinuous policy rule used by the Central Bank of Colombia. We use a unique data set that comprises tick by tick intervention and order book data, daily capital in- and outflows, and balance sheet information of financial institutions. We apply regression discontinuity methods to identify the surprise component of rule-based interventions and use this variation to measure how they affect exchange rates and capital flows.