RUSSIAN JOURNAL OF MONEY AND FINANCE 68 JUNE 2018 Sterilized Interventions in the Form of Foreign Currency Repos: VECM Analysis Using Russian Data 1 Andrei Shulgin, National Research University Higher School of Economics andrei.shulgin@gmail.com Te study examines the foreign currency repo program launched by the Bank of Russia afer fnancial sanctions were imposed on Russia in 2014. Russian 2014–2017 daily statistics were used to estimate three vector error correction models which revealed a statistically signifcant temporary efect of sterilized interventions in the form of foreign currency repos on the ruble exchange rate to the dollar. An impulse response of the exchange rate to the expansion in foreign-currency-denominated borrowings has the correct sign, reaches its maximum on the 9 th business day and is found to be statistically signifcant within 7–14 business days afer the auction date. Te response of the exchange rate was found to be asymmetric: the winding down of the foreign currency repo program had no statistically signifcant efect on the exchange rate. Keywords: VECM, sterilized interventions, interventions’ efectiveness, foreign currency repos JEL: E58, F32 Citation: Shulgin, A. (2018). Sterilized Interventions in the Form of Foreign Currency Repos: VECM Analysis Using Russian Data. Russian Journal of Money and Finance, 77(2), pp. 68-80. doi: 10.31477/rjmf.201802.68 1. Introduction During the global fnancial crisis, many central banks extensively used sterilized foreign currency interventions to prevent excessive weakening of national currencies arising from sizable capital outfows. Tis instrument helps moderate the transfer of exchange rate fuctuations to prices as balance of payments shocks arise, reduce exchange rate volatility, and maintain currency market liquidity. Sterilized foreign currency interventions can be used on a regular basis as part of the infation targeting regime, provided that a central bank only uses them to normalize the operation of the foreign currency channel of monetary transmission. 1 Support from the Basic Research Program of the National Research University Higher School of Economics is gratefully acknowledged.