Excessive intervention can hinder FX markets – IMF economists
Best for central banks to deepen their reserves before shocks arise
Excessive intervention can prevent foreign exchange markets from developing fully, International Monetary Fund (IMF) economists have claimed.
In a blog post on October 10, the economists say excessive intervention would mean foregoing the full benefits of maintaining a free-floating exchange rate system.
They add that excessive interference could also create moral hazard by raising expectations that the central bank will step in to stem losses whenever needed. This might reduce the incentive for
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