Description

In this article we evaluate the effectiveness of the last four foreign exchange interventions (FXI) of the Central Bank of Chile (CBC). Using daily and intraday data of the nominal exchange rate, the results show through different empirical methods (local projections, event study, SDID) that both interventions aimed at solving volatility problems in the FX market (dated in 2019 and 2022) were effective, meaning they significantly reduced exchange rate volatility. The results support the implications of the different mechanisms that have been proposed in the literature to understand the effects of FXI. At the same time, these results suggest that intervening in the forward market appears to be as effective as intervening in the spot market.