The macroeconomic impact of foreign exchange intervention: An empirical study of Thailand

This paper focuses on empirically investigating the efficacy of foreign exchange intervention in the Thai economy by simulation analyses. We find that foreign reserves are determinants of exchange rate dynamics, whereas the uncovered interest parity condition does not hold. We also find that foreign exchange intervention influences the inflation rate via the exchange rate, although by a lesser degree, whereas such an intervention for an extended period is likely to incur higher costs of the macro economy.