TY  - JOUR
AU  - Lewis,Karen K.
TI  - Are Forign Exchange Intervention and Monetary Policy Related and Does it Really Matter?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4377
PY  - 1993
Y2  - June 1993
UR  - http://www.nber.org/papers/w4377
L1  - http://www.nber.org/papers/w4377.pdf
N1  - Author contact info:
Karen K. Lewis
Department of Finance, Wharton School
2300 SHDH
University of Pennsylvania
Philadelphia, PA 19104-6367
Tel: 215/898-7637
Fax: 215/898-6200
E-Mail: lewisk@wharton.upenn.edu
M2  - featured in NBER digest on 1993-11-01
AB  - The relationship between foreign exchange intervention and monetary policy underlies the question of whether sterilized interventions can affect the exchange rate. In this paper, I examine this relationship using data on U.S. foreign exchange interventions from 1985 to 1990, recently made publicly available. I examine whether interventions could be viewed as "signaling" changes in future monetary policy variables. I also consider whether changes in monetary policy may induce interventions in an effort to "lean against the wind" of exchange rate movements. Interestingly, I find evidence both that interventions help predict monetary policy variables, and that monetary variables help predict interventions. These relationships matter for understanding exchange rate behavior only if monetary variables indeed affect the exchange rate. Therefore, I also study the response of exchange rates to shocks in various monetary policy variables. The results provide new evidence on the relationship between exchange rates, monetary policy, and foreign exchange interventions.
ER  -