Once a monetary authority targets an exchange rate, the key distinction between nonsterilized intervention and traditional monetary policy is that the former transacts exclusively through foreign exchange.
Lesson #2: Nonsterilized Intervention Can Create Policy Dilemmas
Nonsterilized intervention stood a better chance of creating the desired outcome but would have left a foreign-exchange exposure on the Bank's balance sheet.
Nonsterilized Intervention, Foreign Exchange, and the Federal Funds Rate
2001) "Sterilized Intervention, Nonsterilized Intervention, and Monetary Policy.
However, nonsterilized intervention
does allow capital inflows to exert a downward pressure on domestic interest rates.
1] Nonsterilized intervention
seems completely redundant to open-market operations in domestic securities.