Talks, financial operations or both? Generalizing central banks' FX reaction functions
Oscar Bernal and
No 07-03.RS, DULBEA Working Papers from ULB -- Universite Libre de Bruxelles
This paper generalizes central banks’ FX interventions reaction functions to include oral interventions alongside actual ones. Using Japanese data for the 1991-2004 period, we estimate an ordered probit explaining the occurrence of each type of intervention and evaluating the extent to which oral and actual interventions are substitutes or complements. Our results indicate that monetary authorities tend to adopt progressively stronger measures as the exchange rate behaves in an increasingly unfavorable way. This suggests that words and acts are used as complements only in extreme cases.
Keywords: Central banks; Foreign exchange market; Interventions; Communication policy (search for similar items in EconPapers)
JEL-codes: E58 F31 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-ifn, nep-mac and nep-mon
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Published by: ULB, DULBEA
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