Abstract
This study extends the traditional set of central bank's interventions to include offial announcements in order to provide empirical evidence on two pivotal questions: i) are FX authorities able to influence market expectations with dierent instruments? ii) how should interventions be designed to have the
greatest impact?
Using Japanese data over 1992-2004 and an event-study approach, we estimate the effect of different strategies on the USD/JPY exchange rate risk neutral density. Overall, transparent policies (public and oral interventions) appear to be the most effective. Moreover, the eect is greater when policies involve
a financial cost (risk) suggesting that simple announcements can only imperfectly substitute for actual
interventions
| Original language | English |
|---|---|
| Pages (from-to) | 432-446 |
| Number of pages | 15 |
| Journal | Journal of International Financial Markets, Institutions and Money |
| Volume | 19 |
| Issue number | 3 |
| Publication status | Published - 2009 |