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Author(s) / Editor(s): 
  • Hernando Vargas-Herrera
  • Pamela Cardozo
  • Mauricio Villamizar-Villegas

International Reserve Policy and Effectiveness of Sterilized FX Intervention in Colombia

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). 

Publicado el: 
Wednesday, 31 July 2019

The opinions contained in this document are the sole responsibility of the authors and do not commit Banco de la República or its Board of Directors



Two FX policy issues are discussed based on the recent Colombian experience. First, the increased participation of foreign investors in local bond markets since 2014 induced a reassessment of international reserve adequacy. We present the resulting LCR-type methodology to evaluate adequacy, together with a brief description of the international reserve management strategy in Colombia. Second, we shed some light on the debate regarding the effectiveness of sterilized FX intervention, showing that exchange rate effects depend on the “flimsiness” of exchange rate expectations or their fundamental determinants. To support this, we provide both empirical and theoretical evidence.