Nonsterilized intervention is intervention by a central bank in the foreign exchange market without adjusting for the change in money supply.

Question

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Nonsterilized intervention involves the central bank purchasing or selling foreign currency without simultaneously offsetting the impact on the monetary base or money supply through open market operations. This means that the intervention can potentially affect the exchange rate as well as domestic interest rates and inflation, depending on the monetary policy stance. In contrast, sterilized intervention involves offsetting the impact on the monetary base through an equivalent purchase or sale of domestic securities, which can limit the spillover effects on other macroeconomic variables.

Nonsterilized Intervention Is Intervention by a Central Bank in the Foreign