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Official Japanese Intervention in the JPY/USD Exchange Rate Market: Is It Effective and Through Which Channel Does It Work?

Rasmus Fatum

No 2009-02, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper investigates whether official Japanese intervention in the JPY/USD exchange rate over the January 1999 to March 2004 time period is effective. By integrating the official intervention data with a comprehensive set of newswire reports capturing days on which there is a rumor or speculation of intervention, the paper also attempts to shed some light on through which of the two channels, the signaling channel in a broad sense or the portfolio balance channel, effective Japanese intervention works. The results suggest that Japanese intervention is effective during the first 5 years of the sample and ineffective during the last 3 months of the sample, thereby providing an ex-post rationale for why Japan intervened as well as for why the interventions stopped. Moreover, the results suggest that when Japanese intervention is effective, it works through a portfolio-balance channel. The results do not rule out that effective intervention also works through signaling.

Keywords: exchange rates; foreign exchange market intervention; channels of Transmission (search for similar items in EconPapers)
JEL-codes: E52 F31 G14 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-01
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (1) Track citations by RSS feed

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Journal Article: Official Japanese Intervention in the JPY/USD Exchange Rate Market: Is It Effective, and through Which Channel Does It Work? (2009) Downloads
Working Paper: Official Japanese Intervention in the JPY/USD Exchange Rate Market: Is It Effective and Through Which Channel Does It Work? (2009) Downloads
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