Abstract

ROSAS ROJAS, Eduardo. Sterilized intervention in Latin America's foreign exchange markets: Brazil, Chile and Mexico. Prob. Des [online]. 2011, vol.42, n.167, pp.97-122. ISSN 0301-7036.

We analyze the relevance of the conventional macroeconomic model supporting the inflation target program and examine its non-viability when interest rate parity is rejected, making it possible to apply sterilized intervention in the foreign exchange market as a monetary policy instrument. In this study, we want to use econometric methods to evaluate whether three Latin American countries (Brazil, Chile and Mexico) -which refer to themselves as having floating currencies, as their central banks adopt inflation target programs, and where a magnified pass-through effect is observed from the exchange rate to inflation -effectively use sterilized intervention in the foreign exchange market to regulate their exchange rates.

Keywords : Sterilized intervention; exchange rate; monetary policy; exchange rate discovery through interest rates; fear of floating.

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