51 direct intervention nonsterilized vs sterilized

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Unformatted text preview: nal currency   To weaken: to sell na-onal currency & build up foreign reserves 3 1.5.1. Direct intervention    Non ­sterilized vs. sterilized interven-on:   When central banks intervene the foreign exchange market without changing the money supply  sterilized   If there is no offseJng transac-ons  money supply changes  non ­sterilized    Effec-veness of direct interven-on depends on:   Amount of reserves   Coordinated effort among central banks 4 1.5.1. Direct intervention (cont’d) E.g. of strengthen pound of Bank of England Non ­sterilized interven-on – buys £ Sterilized interven-on – buys £ then buys Treasury Bills £ in Bank of England £ out Forei...
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