Great earthquakes, exchange rate volatility and government interventions
Mariko Hatase (),
Mototsugu Shintani and
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Mariko Hatase: Bank of Japan
No 13-00007, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics
The Great East Japan Earthquake in 2011, as well as the Great Hanshin-Awaji Earthquake in 1995 and the Great Kanto Earthquake in 1923, resulted in disorderly movements of yen in the foreign exchange market. This paper investigates the exchange rate volatility shift after these three great earthquakes in Japan and examines if similar excess volatility after major earthquakes can also be observed in other countries. In addition, using a unique daily data set from the Great Kanto Earthquake period, the episode with the largest increased volatility among all three great earthquakes, we estimate a reaction function of foreign exchange market intervention, and evaluate the role of government intervention in stabilizing the foreign exchange market during the time of increased uncertainty caused by a large unexpected negative shock in the economy.
Keywords: foreign exchange intervention; natural disasters; propensity score (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-13-00007
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