Reference no: EM133130723

Perspectives on whether central banks should intervene to affect exchange rates vary widely, and not along the usual liberal-conservative sides. The arguments for intervention usually focus on two objectives: how central bank intervention can be used to smooth exchange rate movements to (1) stabilize the economy and financial markets and (2) perhaps also to promote the trade interests of their countries. Both Donald Trump and Bernie Sanders have advocated for intervention to promote U.S. trade interests, while Bill Clinton, Barack Obama, and many traditional economic conservatives have usually been skeptical about intervention being effective. What are two reasons to be skeptical about the effectiveness of using central bank intervention to change the exchange rate for their country's currency?