【標準的なニューケインジアンモデル✨】『Modeling Sterilized Interventions and Balance Sheet Effects of Monetary Policy in a New-Keynesian Framework』：IMF Working Paper No.2💝2023/11/07

Since the financial crisis of 2008/9 the use of FX interventions as a monetary policy instrument has further increased.
Central banks in emerging markets employed massive interventions to dampen currency appreciation arising from carry trade flows during 2007–mid 2008 (Adler and Tovar (2011)).

Later, when emerging currencies came under selling pressure, many central banks sold FX to control the speed of depreciation.

At the same time, central banks in several developed countries (including Switzerland, Australia, and Israel, among others) embarked on regular interventions as a part of their efforts to stabilize domestic financial conditions.

 In 2010—with a gradual return of capital inflows to emerging markets—central banks once again started accumulating FX reserves to limit currency strengthening and protect competitiveness (among other reasons).

The standard modeling approach does not capture such intervention practices.

Rather, the literature addresses them, if at all, in the context of a standard new–Keynesian inflation targeting model that has only one instrument—the interest rate—to affect both inflation and the exchange rate, e.g., as in Monacelli (2004).

However, intervention practices in emerging markets operate through different channels than the interest rate policy of the central bank.

In some cases, such as the Czech Republic in 2002 (Gersl and Holub (2006)), the interventions are used as an additional instrument in achieving the central bank’s intermediate objectives—such as inflation—supporting the interest rates as the main instrument.

There are also cases where interventions are used independently from the main instrument, and aim at different intermediate objectives (such as competitiveness) than interest rate policy.
Israel in 2008/9 is an example.

Standard modeling approaches featuring only a Taylor-type rule are too stylized to model the interactions between the two instruments and their separate transmission channels.

The main contribution of this paper is the extension of a standard inflation targeting New-Keynesian small–open–economy (SOE) model to include FX interventions as an independent central bank instrument.

Our framework adds to the standard New Keynesian model: (i) FX interventions operating alongside interest rate policy; (ii) coexistence of interest–rate–based inflation targeting with a managed float or a fixed exchange rate; and (iii) financial sector balance sheets and portfolio balance sheet effects of intervention policies.

The key new mechanisms here are the interactions of two policy rules with two financial sector spreads (premia) that close the model.

The two rules describe the central bank’s use of its two instruments: a key policy rate and FX reserve accumulation.

By default the former is used to target inflation, while the latter the exchange rate, but both rules can feature multiple targets.

The intervention mechanism works through a financial sector whose holdings of financial assets are subject to endogenous interest rate spreads.

Our model features various portfolio balance sheet effects.

They result from constraints on the optimization of the financial sector and of households in the model.

These constraints lead to wedges (premia) between the interest rates for different assets, which depend on the relative supply of the financial assets themselves.

The premia allow sterilized interventions—which change the relative supply of central bank paper available to the financial system—to influence the exchange rate.