Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market, but does not adjust for the resulting change in the money supply. This is an example of:

Question

Quizplus · Accepted Answer

Nonsterilized intervention refers to the purchase or sale of foreign currency without adjusting for the resulting change in the money supply. This can lead to changes in the exchange rate and domestic money supply. Therefore, the central bank in this scenario is engaging in nonsterilized intervention.

Assume a Central Bank Exchanges Its Currency for Other Foreign