Foreign Exchange Market Interventions and the $-¥ Exchange Rate in the Long Run*
Joscha Beckmann (),
Ansgar Belke and
Authors registered in the RePEc Author Service: Michael Kühl ()
No 201307, ROME Working Papers from ROME Network
This paper tries to clarify the question of whether foreign exchange market interventions conducted by the Bank of Japan are important for the dollar-yen exchange rate in the long run. Our strategy relies on a re-examination of the empirical performance of a monetary exchange rate model. This is basically not a new topic; however, we put our focus on two new questions. Firstly, does the consideration of periods of massive interventions in the foreign exchange market help to uncover a potential long-run relationship between the exchange rate and its fundamentals? Secondly, do Forex interventions support the adjustment towards a long-run equilibrium value? Our overall results suggest that taking periods of interventions into account within a monetary model does improve the goodness of fit of an identified longrun relationship to a significant degree. Furthermore, Forex interventions increase the speed of adjustment towards long-run equilibrium in some periods, particularly in periods of coordinated forex interventions. Our results indicate that only coordinated interventions seem to stabilize the dollar-yen exchange rate in a long-run perspective. This is a novel contribution to the literature.
Keywords: Structural exchange rate models; cointegration; intervention analysis (search for similar items in EconPapers)
JEL-codes: E44 F31 G12 (search for similar items in EconPapers)
Pages: 36 pages
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http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2013-07.pdf First version, 2013 (application/pdf)
Journal Article: Foreign exchange market interventions and the $-¥ exchange rate in the long run (2015)
Working Paper: Foreign Exchange Market Interventions and the $-¥ Exchange Rate in the Long-Run (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:rmn:wpaper:201307
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