Foreign Exchange Interventions and Covered Interest Parity Deviations
Advisor: Márcio Garcia
Examiners: Marcelo Medeiros, Marcos Chamon.Are there spillovers from foreign exchange sterilized intervention (FXI) across other economic variables? In this paper, we investigate the effect of an intervention in the forward exchange market on deviations from covered interest parity (CIP). We analyze a major program ruled by the Brazilian Central Bank, between 2013 and 2015. To estimate the effect, we build an artificial counterfactual. The results indicate that selling dollars in the forward market to damping the Brazilian real depreciation, leads to an increase in the CIP deviations.
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