How are foreign exchange intervention
Posted on Nov 9, 2000 08:15:27 AM
Among the economic measures to regulate the activities of commercial banks in the Russian Federation is pursued by the Central Bank of Russia monetary policy. Shape and direction of monetary policy pursued by the Bank of Russia will depend on domestic economic situation of the country and its place in the world economy. Goals of the monetary policy may vary depending on the historical period. Essential tool for implementing monetary policy the Bank of Russia is a foreign exchange regulation.
Under exchange control central bank holds foreign exchange intervention. As a rule, the Bank of Russia uses two main forms of monetary policy:
1) discount;
2) motto.
Discount, or discount, the policy is carried out, firstly, to change the terms of the refinancing of domestic commer ¬ skih banks, and secondly, is aimed at regulating foreign exchange and balance of payments. In modern rynochnyhusloviyah in developed and fairly stable economy dominated by domestic interests. Quite often happens that the internal and external interests do not coincide, and there is a need to address the contentious issues between the Central Bank and government agencies in the Ministry of Finance, etc.
In this case, the central bank, buying or selling foreign currency (the motto), is working in the right direction to change the course of the national currency – foreign exchange policy. That such operations and called an intervention. Buying from the official reserves (or through arrangements “swap”), the national currency, it increases demand, and hence its rate.
Conversely, the sale of the Central Bank of the major parties of the national currency leads to a reduction of its rate, as increased supply on the market.
The influence exerted by central bank monetary policy in the form of operations on the futures exchange market, manifested in the promotion of exports or imports of capital. The direction of the desired movement of capital depends on the policy priorities of the Central Bank in the current economic situation, which may be expressed either in the promotion of commodity exports (dumping policy), or in the maintenance of the national currency against foreign currency.
Conducted by the Central Bank of Russian Federation foreign exchange intervention can be sufficiently effective only if implementation of the State of coherent, integrated monetary and fiscal policies.
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