Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s

Takatoshi Ito ()

No 8914, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines Japanese foreign exchanges interventions from April 1991 to March 2001 based on newly disclosed official data. All the yen-selling (dollar-purchasing) interventions were carried out when the yen/dollar rate was below 125, while all the yen-purchasing (dollar-selling) interventions were carried out when the yen/dollar was above 125. The Japanese monetary authorities, by buying the dollar low and selling it high, have produced large profits, in terms of realized capital gains, unrealized capital gains, and carrying (interest rate differential) profits, from interventions during the ten years. Profits amounted to 9 trillion yen (2% of GDP) in 10 years. Interventions are found to be effective in the second half of the 1990s, when daily yen/dollar exchange rate changes were regressed on various factors including interventions. The US interventions in the 1990s were always accompanied by the Japanese interventions. The joint interventions were found to be 20-50 times more effective than the Japanese unilateral interventions. Japanese interventions were found to be prompted by rapid changes in the yen/dollar rate and the deviation from the long-run mean (say, 125 yen). The interventions in the second half were less predictable than the first half.

JEL-codes: E58 F31 (search for similar items in EconPapers)
Date: 2002-04
New Economics Papers: this item is included in nep-ifn
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Published as Mizen, Paul (ed.) Monetary History, Exchange Rates and Financial Markets, Essays in Honour of Charles Goodhart, Volume 2. Cheltenham U.K. : Edward Elgar Pub, 2003.

Downloads: (external link)
http://www.nber.org/papers/w8914.pdf (application/pdf)

Related works:
Chapter: Is foreign exchange intervention effective? The Japanese experiences in the 1990s (2003)
Working Paper: Is Foreign Exchange Intervention Effective?: The Japanese experiences in the 1990s (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:8914

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w8914

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().