Foreign Exchange Market Intervention, International Experience And Revelation

Foreign exchange intervention includes direct intervention and indirect intervention carried on by the government. Direct intervention occurs when the authorities buy or sell foreign exchange in order to affect the exchange rate; Indirect intervention occurs when the authorities intervene the foreign exchange market through monetary policy . The research object of this paper is direct foreign exchange intervention. Although different nation adopts different exchange rate system, FX intervention has very important policy meaning. So, it is very necessary to carry on a more thorough research on this topic.The introductory portion of this paper introduces background, literature review and research thought; The first portion analyses evolution of objectives, transmission channels and tactics of FX intervention in foreign countries; The second portion analyses the foreign exchange intervention experience in G3 countries; The third portion analyses evolution of objectives, transmission channels and tactics of FX intervention in China; The fourth portion analyses foreign exchange intervention practice in China and the seven problems; The fifth portion puts forward eight proposals about improving FX intervention: Reformation the system of exchange, settlement and sales, improving the functions of the central bank, extending business of FX market, establishing inter-bank FX loan market, improving exchange rate formation mechanism, strengthening FX intervention to be an organic part of monetary policy regulation, strengthening construction of government debts, pressing ahead with reformation of interest rate; the last portion is a brief conclusion.