Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks?

This work has benefited at different stages from comments and valuable conversations with Ahuja Ashvin, Tam Bayoumi, Jorge Braga de Macedo, Marcos Chamon, Varapat Chensavasdijai, Luca Dedola, José De Gregorio, Sebastian Edwards, Jeff Frankel, Rex Ghosh, Roberto Guimarães, Olivier Jeanne, Sebnem Kalemli-Ozcan, Martin Kaufman, Ruy Lama, Márcio Laurini, Nan Li, Kenji Moriyama, Christopher Neely, Jonathan Ostry, Steven Phillips, Helene Poirson, Ubirajara da Silva and Yossi Yakhin; as well as feedback from participants at various IMF seminars, the 2014 SNB Conference on “Exchange Rates and External Adjustment”, the EMG-ECB 4th Emerging Markets Group Conference, the LACEA 2014 Annual Conference, and the 2015 NBER Summer Institute . We also thank Jair Rodriguez and Mauricio Vargas for their research assistance. Irineu de Carvalho Filho benefited from the hospitality of the Swiss National Bank and Georgetown University School of Foreign Service in Qatar. Remaining errors are ours. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, IMF management, or the National Bureau of Economic Research.