An Analysis of the Effectiveness of Exchange Rate Interventions in Peru

Beyond the role of forex intervention as an international reserve accumulation tool, forex interventions are less frequently implemented as macroeconomic policy tools. However, these interventions have actively been used by the Peruvian monetary authorities over the last 25 years. This article explores the Central Reserve Bank of Peru forex interventions in the spot market during the period 2003-2015 through an event study and the estimation of a threshold model. The evidence suggests the forex interventions were effective to smooth FX volatility and to generate changes against the currency trend movement (during extreme forex volatility episodes). (Audio: Department of Economic Publications)