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US FOREIGN EXCHANGE MARKET INTERVENTION SINCE 1962
Author(s) -
Schwartz Anna J.
Publication year - 1996
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.1996.tb00854.x
Subject(s) - treasury , sterilization (economics) , liberian dollar , foreign exchange , exchange rate , currency , foreign exchange market , intervention (counseling) , economics , monetary economics , special drawing rights , international economics , us dollar , business , foreign exchange risk , reserve currency , finance , political science , law , medicine , psychiatry
A bstract The Federal Reserve has intervened in foreign exchange markets since 1962 as a partner of the Treasury's Exchange Stabilization Fund. Departing from its scripted passive role under the Bretton Woods system, the US defense of the dollar under pegged exchange rates may not appear unreasonable. Why the practice continues under a floating rate system is harder to understand. By accumulating large foreign currency balances since 1987, the US has made intervention easier. Holding larger balances does not help the authorities know what exchange rates ought to be. The US for a few years in the 1980s refrained from intervening. It can happen again if its authorities acknowledge that intervening is an exercise in futility.