Sterilized intervention

Sterilized intervention

Foreign exchange market activity by which monetary authorities insulate their domestic money supplies from the foreign exchange transactions with offsetting sales or purchases of domestic assets.
References in periodicals archive ?
The RBI has a foreign exchange war chest of $ 291 billion that it could use judiciously for sterilized intervention in the market to control the volatility of the rupee.
Under the practical assumption of fully sterilized intervention, we simultaneously derive the intervention reaction function and the exchange rate process under two intervention modes (secret vs.
The final net effect of such a sterilized intervention would be to decrease the supply of dollar-denominated securities relative to yen-denominated securities on the market.
Some observers suggest that the United States, ideally in conjunction with the Bank of Japan and the European Central Bank, undertake sterilized intervention to prevent further dollar depreciation.
Sterilized intervention affects long run exchange rates much less than non-sterilized intervention
The policy of first recourse across countries and over time has been sterilized intervention.
Opponents argue that sterilized intervention has little lasting influence on exchange rates.
The Fed undertakes sterilized intervention for its own account and for the ESF.
Sterilized intervention typically involves government support of its exchange rate by selling foreign exchange reserves, and then sterilizing (undoing) the potential contractionary effect on the domestic monetary base through a simultaneous and equal purchase of domestic currency bonds.
In the course of their review, the members discussed sterilized intervention by the Federal Reserve in the foreign exchange markets.
In the context of an economic system dominated by the banks, the use and impact of the main monetary policy instruments is discussed, namely, the short term interest rate set by the central bank or reference interest rate, the reserve requirement ratio in local and foreign currencies, and, finally, sterilized intervention in the foreign exchange market.
Such actions, called sterilization or sterilized intervention, will jeopardize the exchange-rate peg unless accompanied by restrictions on imports and controls on financial outflows.