Volume 24, Issue 1 (2024)
QJER 2024, 24(1): 223-254 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Abaszadeh M, Sahabi B, Heydari H. A comparative study of the intervention in foreign exchange markets in Iran, Mexico and Türkiye. QJER 2024; 24 (1) : 9
URL: http://ecor.modares.ac.ir/article-18-68033-en.html
URL: http://ecor.modares.ac.ir/article-18-68033-en.html
1- Ph.D. Candidate in Economics, Tarbiat Modares University, Tehran, Iran
2- Associate Professor of Economics, Tarbiat Modares University , Tehran,Iran , sahabi_b@modares.ac.ir
3- Assistant Professor of Economics, Tarbiat Modares University, Tehran, Iran
2- Associate Professor of Economics, Tarbiat Modares University , Tehran,Iran , sahabi_b@modares.ac.ir
3- Assistant Professor of Economics, Tarbiat Modares University, Tehran, Iran
Abstract: (932 Views)
The aim of this study is the comparative study of the intervention in foreign exchange markets in Iran, Türkiye and Mexico. Therefore, the goals, methods, and different tactics of the foreign exchange interventions of the central banks are discussed. In addition, in this study, to investigate and compare the behavior of the monetary authorities in the face of increasing exchange rate fluctuations, using the ordinary least squares method, the reaction function of the central bank has been estimated. The results of this research show that the foreign exchange interventions in Iran are different from those of Türkiye and Mexico in terms of the key features investigated. Also, according to the reaction function estimation results, in these countries the increase in the exchange rate leads to more sensitivity of the monetary authorities compared to its decrease.
Introduction
In this research, by examining the features of foreign exchange interventions, the differences and similarities of this foreign exchange policy are evaluated in Iran, Türkiye, and Mexico. Due to features such as the establishment of a floating currency system, the availability of daily intervention data, and the experience of currency crises, two emerging economies, Mexico and Türkiye, have been chosen to match the characteristics of foreign exchange interventions with interventions in Iran.
Methodology
First, we examine the general policies and laws of central banks in relation to foreign exchange policies in Türkiye and Iran. Then we have compared Iran, Mexico, and Türkiye's measures related to foreign exchange interventions. Laws, characteristics, reasons, and laws of foreign exchange interventions in Türkiye, Mexico and Iran are evaluated. The results of this research show how the laws, goals, and implementation methods of different foreign exchange interventions in Türkiye, Mexico, and Iran will reflect different reactions of the monetary authority. In this research, the ordinary least squares method is used to estimate the reaction function of the central banks of Iran, Mexico, and Türkiye. We consider the reaction function of the central bank as follows:
R t = c + α e t ~ + β ( e t ~ ) 2 + v t
In this equation,R t e t ~
Findings
The interventions of Mexico and Türkiye are different from the foreign exchange interventions in Iran in terms of the level of transparency, regularity, sterilization, and the tools used. In addition, some goals affecting the interventions were also different in the three countries. This result shows that among the monetary authorities of all three countries, there is a fear of an increase in the exchange rate, and the foreign exchange interventions of the countries are mainly aimed at reducing the exchange rate.
Discussion and Conclusion
The results show that the interventions of Mexico and Türkiye are different from the foreign exchange interventions in Iran in terms of the level of transparency, regularity, sterilization and the tools used. In addition, some goals affecting the interventions were also different in the three countries. Also, the results show that the monetary authorities of all three countries are more sensitive to an increase in the exchange rate than to a decrease in the exchange rate.
Introduction
In this research, by examining the features of foreign exchange interventions, the differences and similarities of this foreign exchange policy are evaluated in Iran, Türkiye, and Mexico. Due to features such as the establishment of a floating currency system, the availability of daily intervention data, and the experience of currency crises, two emerging economies, Mexico and Türkiye, have been chosen to match the characteristics of foreign exchange interventions with interventions in Iran.
Methodology
First, we examine the general policies and laws of central banks in relation to foreign exchange policies in Türkiye and Iran. Then we have compared Iran, Mexico, and Türkiye's measures related to foreign exchange interventions. Laws, characteristics, reasons, and laws of foreign exchange interventions in Türkiye, Mexico and Iran are evaluated. The results of this research show how the laws, goals, and implementation methods of different foreign exchange interventions in Türkiye, Mexico, and Iran will reflect different reactions of the monetary authority. In this research, the ordinary least squares method is used to estimate the reaction function of the central banks of Iran, Mexico, and Türkiye. We consider the reaction function of the central bank as follows:
In this equation,
Findings
The interventions of Mexico and Türkiye are different from the foreign exchange interventions in Iran in terms of the level of transparency, regularity, sterilization, and the tools used. In addition, some goals affecting the interventions were also different in the three countries. This result shows that among the monetary authorities of all three countries, there is a fear of an increase in the exchange rate, and the foreign exchange interventions of the countries are mainly aimed at reducing the exchange rate.
Discussion and Conclusion
The results show that the interventions of Mexico and Türkiye are different from the foreign exchange interventions in Iran in terms of the level of transparency, regularity, sterilization and the tools used. In addition, some goals affecting the interventions were also different in the three countries. Also, the results show that the monetary authorities of all three countries are more sensitive to an increase in the exchange rate than to a decrease in the exchange rate.
Article number: 9
Keywords: Central Bank Reaction Function, Iran's currency policy, Türkiye's currency policy, Mexico's currency policy
Article Type: Original Research |
Subject:
International Economics
Received: 2023/03/12 | Accepted: 2023/04/25 | Published: 2024/03/18
Received: 2023/03/12 | Accepted: 2023/04/25 | Published: 2024/03/18
Send email to the article author
| Rights and permissions | |
 |
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |