The effectiveness of foreign exchange (FX) intervention is heavily disputed and the issue is far from being settl by dint of empirical evidence.

The effectiveness of foreign exchange (FX) intervention is heavily disputed and the issue is far from being settl by dint of empirical evidence. Still, central banks use foreign exchange intervention to influence exchange rate behavior. In general, FX interventions are primarily undertaken to maintain or justify a certain exchange rate commitment. Countering disorderly market conditions or dampening short-term exces volatility are other important driving forces. This model of intervention is, for instance, treated in Article IV of the Articles of Agreement of the IMF. (1)

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