ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Unsterilized foreign exchange interventions take place when a country’s monetary authorities influence exchange rates and its money supply. This policy takes place when a central bank doesn’t offset the purchase or sale of foreign or domestic currencies or assets with another transaction.

Detailed explanation-2: -If the intervention has no impact on the short-term interest rate, it is sterilised. If the short-term interest rate is affected, the intervention is non-sterilised. Non-sterilised intervention may impact the exchange rate through various channels.

Detailed explanation-3: -If the action has no effect on the short-term interest rate, it is a sterilized intervention. If the short-term interest rate does change as a result of the action, it is a non-sterilized intervention or unsterilized intervention.

Detailed explanation-4: -What Is Sterilized Intervention? Sterilized intervention is the purchase or sale of foreign currency by a central bank to influence the exchange value of the domestic currency, without changing the monetary base.

Detailed explanation-5: -What Is Foreign Exchange Intervention? A foreign exchange intervention is a monetary policy tool that involves a central bank taking an active, participatory role in influencing the monetary funds transfer rate of the national currency, usually with its own reserves or its own authority to generate the currency.