Academic researchers have often questioned the usefulness of official foreignexchange
intervention. However, proponents of foreign-exchange intervention note
that it may be useful when the exchange rate is under speculative attack; that is, when a
change in the exchange rate is not justified by fundamentals. It may also be helpful
in coordinating private-sector expectations. Recent research provides some support
for the short-term effectiveness of intervention. However, this should not be interpreted
as a rationale for intervention as a long-term management tool.4