TD n. 630 2015

Marcos Chamon, Márcio Gomes Pinto Garcia, Laura Candido de Souza.

The taper tantrum of May 2013 generated sharp fall in risky assets prices,

including the depreciation of several emerging market currencies. To fight

excess volatility and exchange rate overshooting, the Central Bank of Brazil

announced a major program of interventions in foreign exchange markets. We

use a synthetic control approach to determine whether or not the

intervention program was successful. Our results suggest that the first FX

intervention program mitigated the depreciation of the real against the

dollar. A second announcement made later in the year that the program

was going to continue on a smaller basis had a smaller effect, which was not

significant. This result is corroborated by a standard event study

methodology. We also document that both program did not have an impact on the volatility of the exchange rate