Implicit bands in the yen/dollar exchange rate

This paper reviews the empirical evidence on the monetary policy of the Bank of Japan (BOJ). The main findings confirm [McKinnon, R., Ohno, K., Dollar and Yen, Resolving Economic Conflict between the United States and Japan. MIT Press, Cambridge, MA, USA, 1997] thesis that the BOJ has tried to stabilize exchange rate. The interest rate is counter-cyclical to the exchange rate and the coefficient of inflation, which is not weakly exogenous, is significantly smaller than 1. Impulse response analysis confirms the BOJ's sensitivity not only to inflation and output gap but also to exchange rate. Finally, historical decomposition reveals a major role for exchange rate in explaining cyclical patterns of the interest rate, especially during the bubble period.

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Monetary policy of the Bank of Japan—inflation target versus exchange rate target

Andrade

Divino

2005

Japan and the World Economy

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Volatility in EMU Sovereign Bond Yields: Permanent and Transitory Components

Sosvilla‐Rivero

Morales‐Zumaquero

2011

SSRN Journal

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3Resumen Este artículo explora la cambiante volatilidad de los rendimientos de la deuda soberana en la Unión Económica y Monetaria (UEM). Para ello, se examina el comportamiento de los rendimientos diarios de 11 países de la UEM (UEM-11), durante el período 2001-2010. En un primer paso, descomponemos la volatilidad de los componentes permanentes y transitorios utilizando el modelo GARCH de componentes propuesto por Engel y Lee (1999). Nuestros resultados sugieren que los componentes transitorios, relacionados con la percepción del mercado, tienden a ser menos importantes en la explicación de la volatilidad o riesgo de los bonos que las perturbaciones registradas en las variables macroeconómicas subyacentes. En un segundo paso, se desarrolla un análisis de correlación y causalidad que indica la existencia de dos grupos diferentes de países estrechamente relacionados: los países que conforman el núcleo de la UEM y los países periféricos de la UEM. Por último, en una tercera etapa, se realiza un análisis cluster que respalda nuestros resultados sobre la existencia de dos grupos diferentes de países, con distintas posiciones respecto a la estabilidad de las finanzas públicas.Palabras clave: varianza condicional, el modelo de componentes, análisis de conglomerados, los rendimientos de los bonos soberanos, Unión Económica y Monetaria. AbstractThis paper explores the evolving relationship in the volatility of sovereign yields in the European Economic and Monetary Union (EMU). To that end, we examine the behaviour for daily yields for 11 EMU countries (EMU-11), during the 2001-2010 period. In a first step, we decompose volatility in permanent and transitory components using Engel and Lee (1999)´s component-GARCH model. Results suggest that transitory shifts in debt market sentiment tend to be less important determinants of bond-yield volatility than shocks to the underlying fundamentals. In a second step, we develop a correlation and causality analysis that indicates the existence of two different groups of countries closed linked: core EMU countries and peripheral EMU countries. Finally, in a third step, we make a cluster analysis that further supports our results regarding the existence of two different groups of countries, with different positions regarding the stability of public finance.

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The Effectiveness of Fed Intervention on the USD/DM Foreign Exchange Market

Huang¹,

Neun²

2006

Glob. Econ. J.

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This study empirically examines the effectiveness of Fed intervention on the USD/DM exchange market using an event study approach. The event window is defined as 4 (8) days prior/post an intervention. Based on the empirical analysis, the results show that when the Fed follows an "against the wind" policy, exchange rate movements are smoothed and may switch direction. The results are robust and hold for different event window definitions and sample ranges. To test whether the results are due to the exchange rate movement itself, we conduct a simple test using customer trades by the Fed. The results do not exhibit a systematic pattern. We also find that a joint intervention has a stronger impact on the exchange rate level when the Fed buys US dollars. The policy implication of our findings is that intervention in foreign exchange markets on the part of the Fed to impact the value of the US dollar is a viable policy option.

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Implicit bands in the yen/dollar exchange rate

Cited by 3 publications

References 42 publications

Monetary policy of the Bank of Japan—inflation target versus exchange rate target

Monetary policy of the Bank of Japan—inflation target versus exchange rate target

Volatility in EMU Sovereign Bond Yields: Permanent and Transitory Components

The Effectiveness of Fed Intervention on the USD/DM Foreign Exchange Market

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