Veranstaltungen des DIW Berlin/
Events of DIW Berlin

11 Nov 2015

DIW Seminar on Macroeconomics and Econometrics Optimal FX Intervention in the Face of Capital Outflows

In this paper, we develop a very simple theoretical framework for analyzing optimal FX intervention for an EM which is exposed to a capital outows shock, taking explicit account of the possibility that reserves may run out. The full commitment solution entails a sustained path of FX intervention, with reserves optimally running out for persistent shocks. This solution is not time consistent. The time consistent solution is very different from the full commitment solution for low levels of reserves, with FX intervention slowing to a trickle and reserves never running out. Finally, in cases where an intermediate degree of commitment is possible and the central bank is able to commit to simple rules, such rules may achieve welfare gains above the level associated with the time consistent solution.

More Information
Speaker
  • Pablo Winant, Bank of England

  • Time
    12:00 - 13:15
    Location
    DIW Berlin (Gustav-Schmoller-Raum) DIW Berlin im Quartier 110 Room 3.3.002A Mohrenstraße 58 10117 Berlin
    Contact(s)
    at DIW Berlin
    Tel.: +49 30 89789 420
    Tel.: +49 30 89789 492