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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page The Profitability of U.S. Intervention
Michael P. Leahy
1989-343  (February 1989)

Abstract:  In this paper I address some of the issues associated with measuring the profits and losses from intervention and show that U.S intervention since the beginning of generalized floating in 1973 has earned positive economic profits for the U.S. monetary authorities. Profitability has been largest during episodes of intervention that have generated large foreign-exchange exposures. Fundamental explanations for the profitability of intervention are difficult to isolate, but I discuss possibilities that are consistent with the data. Finally I consider the effects profitable intervention may have on macroeconomic activity through its effect on the government budget constraint.

Full paper(442 KB PDF)

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