An analysis of the interventions by the Central Reserve Bank of Peru in the foreign exchange market: 1999–2001

This document analyzes the interventions of the Central Reserve Bank of Peru in the foreign exchange market between January 1999 and June 2001, with the aim of evaluating their timeliness, effectiveness, and main determinants. Based on intraday data on the exchange rate, trading volumes, and buying and selling interventions, the study finds that the BCR carried out 47 interventions during the period, aimed primarily at moderating sharp fluctuations in the exchange rate. The results show that the interventions had a daily effectiveness of 64% when comparing the closing exchange rate with that of the first intervention, in addition to helping reduce intraday volatility. The analysis distinguishes between purchases and sales, finding that purchases had a greater impact on subsequent trend changes, while sales reduced the pace of depreciation in most cases. Furthermore, using logit/probit models and ordinary least squares, the study identifies that variables such as the exchange rate level, volatility, the exchange rate spread, and trading volume influenced the probability and effectiveness of the interventions.