TY - BOOK ID - 84783974 TI - Foreign Exchange Intervention under Policy Uncertainty AU - Adler, Gustavo. AU - Lama, Ruy. AU - Medina Guzman, Juan Pablo. PY - 2016 SN - 1475547315 1484305302 1475547234 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Banks and Banking KW - Exports and Imports KW - Foreign Exchange KW - Inflation KW - Central Banks and Their Policies KW - Open Economy Macroeconomics KW - Price Level KW - Deflation KW - Banks KW - Depository Institutions KW - Micro Finance Institutions KW - Mortgages KW - International Investment KW - Long-term Capital Movements KW - Currency KW - Foreign exchange KW - Macroeconomics KW - Banking KW - International economics KW - Exchange rates KW - Capital inflows KW - Prices KW - Banks and banking KW - Capital movements UR - https://www.unicat.be/uniCat?func=search&query=sysid:84783974 AB - We study the use of foreign exchange (FX) intervention as an additional policy instrument in an environment with learning, where agents infer the central bank policy rules from its policy actions. Under full information, a central bank focused on stabilizing output and inflation can achieve better outcomes by using FX intervention as an additional policy tool. Under policy uncertainty, where agents perceive that monetary policy may also have exchange rate stabilization goals, the use of FX intervention entails a trade-off, reducing output volatility while increasing inflation volatility. While having an additional policy tool is always beneficial, we find that the optimal magnitude of intervention is higher in monetary policy regimes with lower uncertainty. These results indicate that the benefits of using FX intervention as an additional stabilization tool are greater in regimes where monetary policy is credibly focused on output and inflation stabilization. ER -