Sterilization

[munna99185]

A form of monetary action in which a central bank seeks to limit the effect of inflows and outflows of capital on the money supply. Sterilization most frequently involves the purchase or sale of financial assets by a central bank, and is designed to offset the effect of foreign exchange intervention. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the foreign exchange market.

[Source: http://www.investopedia.com/terms/s/sterilization.asp]

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University