Foreign Exchange Intervention as a Monetary Policy Instrument

1 Introduction.- 1.1 Background.- 1.2 Approach to the Problem and Research Strategy.- 1.3 Structure of the Analysis.- 2 The Conventional View on Inflation Targeting.- 2.1 Definition and Elements of Inflation Targeting.- 2.2 Adoption of Inflation Targeting.- 2.3 A Basic Model for (Closed-Economy) Inflation Targeting.- 2.4 Open Economy Inflation Targeting.- 3 Uncovered Interest Parity in Practice.- 3.1 The Rationale of Interest Parity.- 3.2 An Empirical Test for Inflation Targeting Countries.- 3.3 Consequences of the Failure of UIP.- 4 Sterilised Interventions as an Additional Policy Instrument.- 4.1 Explaining and Interpreting Sterilised Interventions.- 4.2 The Effectiveness of Sterilised Interventions: A Review of the Literature.- 5 Sterilised Foreign Exchange Intervention in Practice.- 5.1 Foreign Exchange Reserves as an Intervention Proxy.- 5.2 Intervention Activity in Inflation Targeting Countries.- 5.3 The Use of Interventions as an Additional Policy Instrument.- 5.4 Short Case Studies of the Country Experiences.- 6 Performance of Inflation Targeting: An Evaluation.- 7 Conclusion and Outlook.- List of Figures.- List of Tables.