The Effectiveness of Currency Intervention in a Commodity-Exporter: Evidence from Mongolia

50 Pages Posted: 9 Apr 2020 Last revised: 16 Apr 2020

See all articles by Victor Pontines

Victor Pontines

South East Asian Central Banks (SEACEN) Research and Training Centre; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Davaajargal Luvsannyam

Research and Statistics Department, Bank of Mongolia

Enkhjin Atarbaatar

Reserve Management and Financial Markets Department, Bank of Mongolia

Ulziikhutag Munkhtsetseg

Economic Research and Training Institute, Bank of Mongolia

Date Written: March 31, 2020

Abstract

Although EME central banks actively intervene in currency markets, there is a long-running debate as to its effectiveness in affecting exchange rates. In this study, we use unique daily data on currency interventions in Mongolia to analyze the impact of these interventions on the changes in the MNT/USD exchange rate. The results indicate that currency intervention is effective in Mongolia, although it differs in certain ways. Currency sales are effective in moving changes in the MNT/USD in the correct direction, especially when carried out in larger amounts and when implemented frequently. This effect can last from one to three weeks, although we find the magnitude of the daily effect to be relatively small. We do not find evidence, however, that currency purchases are effective. These findings are comparable to the existing literature on the effectiveness of intervention in EMEs.

Keywords: Currency intervention, exchange rate, treatment effect, causal effect, local projection, Mongolia

JEL Classification: C14, C32, E58, F31

Suggested Citation

Pontines, Victor and Luvsannyam, Davaajargal and Atarbaatar, Enkhjin and Munkhtsetseg, Ulziikhutag, The Effectiveness of Currency Intervention in a Commodity-Exporter: Evidence from Mongolia (March 31, 2020). CAMA Working Paper No. 31/2020, Available at SSRN: https://ssrn.com/abstract=3564763 or http://dx.doi.org/10.2139/ssrn.3564763

Victor Pontines (Contact Author)

South East Asian Central Banks (SEACEN) Research and Training Centre ( email )

Level 5, Sasana Kijang, Bank Negara Malaysia
2 Jalan Dato’ Onn
Kuala Lumpur, 50480
Malaysia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

Davaajargal Luvsannyam

Research and Statistics Department, Bank of Mongolia ( email )

Baga Toiruu-3, 15160
Ulaanbaatar, 46
Mongolia

Enkhjin Atarbaatar

Reserve Management and Financial Markets Department, Bank of Mongolia ( email )

Baga Toiruu-3, 15160
Ulaanbaatar, 46
Mongolia

Ulziikhutag Munkhtsetseg

Economic Research and Training Institute, Bank of Mongolia ( email )

Baga Toiruu-3, 15160
Ulaanbaatar, 46
Mongolia

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