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Does Foreign Exchange Intervention Volume Matter?

Rasmus Fatum and Yohei Yamamoto
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Rasmus Fatum: School of Business, University of Alberta

No 2012-03, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: We investigate whether foreign exchange intervention volume matters for the exchange rate effects of intervention. Our investigation employs daily data on Japanese interventions from April 1991 to April 2012 and time-series estimations, non-temporal threshold analysis, as well as binary choice models. We find that intervention volume matters for the effects of intervention, but only to the extent that the exchange rate effect per intervention unit is magnified in a linear sense by the larger intervention amount. This is a policy-relevant finding that also adds to our understanding of how intervention works.

Keywords: Foreign Exchange Market Intervention; Intervention Volume (search for similar items in EconPapers)
JEL-codes: E52 F31 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
Date: 2012-05
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