Suraj kumar AgrawalAdvanced
can someone explain the sterilized intervention and unsterilized intervention ?
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Sterilized Intervention is a kind of an action plan by which the Central bank ( Say RBI) purchases or sells foreign Currency ( or Financial Assets) as against domestic ones in order to influence the exchange rate of the domestic currency, without changing its monetary base. You may think of it as a kind of a Dirty Float regime.
The term unsterilized foreign exchange intervention refers to how a country’s monetary authorities influence exchange rates and its money supply—by not purchasing foreign or by not selling domestic currencies or assets. This kind of approach is considered passive to exchange rate fluctuations, allowing for fluctuations in the monetary base.