The effects of Japanese foreign exchange market interventions on the yen/U.S. dollar exchange rate volatility

Abstract

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The effects of Japanese interventions on FX-forecast heterogeneity

“…The authors find that neither expected nor unexpected interventions have an impact on forecast heterogeneity between 1992 and 1994, while the estimated coefficients based on the period 1996 -2001 are statistically significant but ambiguously signed. Against the backdrop of the results presented in Menkhoff et al (2009) and studies of Bank of Japan reaction functions (Frenkel et al, 2005;Ito and Yabu, 2007) these findings may be due to an omitted variable problem, as current misalignment and recent returns of the exchange rate seem to be important not only for central bank intervention activity, but also for forecast heterogeneity. This paper investigates the determinants of forecast heterogeneity in the Yen-US dollar market by applying a large panel data set from Consensus Economics Inc. We consider a number of control variables such as the prevailing volatility regime as well as the risk premium at the foreign exchange market.…”

When do central bank interventions influence intra-daily and longer-term exchange rate movements?

“…See, for example, Bonser-Neal and Tanner (1996), Dominguez (1998), Chaboud and LeBaron (2001), Galati, Melick and Micu (2002), Frenkel, Pierdzioch, and Stadtmann (2003) and Beine (2003). 20 The daily integrated volatilities were created by Steve Weinberg.…”

Foreign exchange market interventions and the $–¥ exchange rate in the long run

“…The opposite should be true for non-credible arrangements (Frenkel et al, 2005;Dominguez, 1998). However, the results regarding this issue are not clear-cut.…”