Central Bank Intervention in the Inflation Targeting

Abstract This paper analyses the impact of central bank interventions in inflation targeting regime. The results empirical studies this show if there is a shock exchange rate, which would lead to depreciation may decide mush instability on foreign market with interventions, thereby preventing sudden rate depreciation, then require smaller reaction by interest rate. Namely, through greatly absorbs and, consequently, lower. As result lower price growth, need for monetary policy response an also Based example, we can see that intervention some cases be very useful order correct disturbances market. Therefore, banks accumulate reserves at high level so as have enough space intervention, without risk falling below optimum level.