Intervention: what are the domestic consequences?

摘要: The conventional wisdom is that central banks can intervene in foreign exchange markets to resist currency appreciation for some time because there no simple, clear ceiling the volume of domestic they sell forex markets. Equally view prolonged, large-scale intervention must eventually weaken macroeconomic performance whether higher inflation, costs misaligned rates or distortions financial system rate/maturity exposures built up by public sector. Yet massive during five years 2000 2004 major emerging market especially Asian has not apparently had such negative effects. Indeed, inflation been low, systems appear stronger and sustained growth. What happened? This paper seeks answer this question.