Are foreign currency operations a good way to stabilize the economy? I just read in the news today that the Central Bank of a country is buying their national currency with foreign currency from their reserve to reduce inflation. Apparently, it's not working too well. I'm not an economic expert but this seems like a bad idea to me. I suppose selling foreign currency will reduce the value of that currency, but I don't think it's going to create any long term effect. It will a minor, temporary change.
Do we have any economy experts here who can shed more light on this? Do you think that foreign currency operations are effective?