Analyses about communication and use of foreign exchange interventions

Central banks, in particular from emerging and developing economies, intervene frequently on foreign exchange markets in order to influence the exchange rate of their domestic currency and thus to stabilize the economy. Unfortunately, there are hardly any administrative data about these interventions available, which limits the scope of analyses to country studies or requires to use very imprecise data approximations. Therefore this project will build on a data basis about interventions that was generated in the root project by updating and refining it. This new data allow to contribute to four objectives: As an innovation in this literature it will be ana-lyzed how communication by authorities is used in the context of interventions and how it can impact the exchange rate. Moreover, the new data allow a combined analysis of interventions with capital controls and macroprodentuial regulation, three tools that are often used together in emerging economies. Third, the project builds on the insight of the root project that interven-tions have persistent impact on the financial sector and tests their potentially direct impact on the real economy. Finally the project will compile heterogeneously stored data about currency reserves (which can be used for foreign exchange interventions) in order to refine the interven-tion data base and to learn about the willingness of central banks to intervene.

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