Résumé
This paper generalizes the reaction functions of central banks' FX interventions to include oral interventions alongside actual ones. Using Japanese data for the 1991-2004 period, we estimate an ordered-probit model explaining the occurrence of each type of intervention and evaluating the extent to which oral and actual interventions are substitutes or complements. In addition, the effectiveness of interventions is examined using an event-study approach. Our results indicate that the Japanese authorities tended to adopt progressively stronger measures as the exchange rate was found to behave in an increasingly unfavorable way. This suggests that words and deeds were only coordinated (i.e. used in a complementary way) in extreme cases. Overall, interventions are found to be moderately successful in correcting unwanted exchange-rate developments, especially volatility.
| langue originale | Anglais |
|---|---|
| Pages (de - à) | 367-394 |
| Nombre de pages | 28 |
| journal | Journal of the Japanese and International Economies |
| Volume | 23 |
| Numéro de publication | 4 |
| Les DOIs | |
| état | Publié - 1 déc. 2009 |
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Announcements, financial operations or both? Generalizing central banks' FX reaction functions. / Bernal, Oscar; Gnabo, Jean Yves.
Dans: Journal of the Japanese and International Economies, Vol 23, Numéro 4, 01.12.2009, p. 367-394.Résultats de recherche: Contribution à un journal/une revue › Article
TY - JOUR
T1 - Announcements, financial operations or both? Generalizing central banks' FX reaction functions
AU - Bernal, Oscar
AU - Gnabo, Jean Yves
PY - 2009/12/1
Y1 - 2009/12/1
N2 - This paper generalizes the reaction functions of central banks' FX interventions to include oral interventions alongside actual ones. Using Japanese data for the 1991-2004 period, we estimate an ordered-probit model explaining the occurrence of each type of intervention and evaluating the extent to which oral and actual interventions are substitutes or complements. In addition, the effectiveness of interventions is examined using an event-study approach. Our results indicate that the Japanese authorities tended to adopt progressively stronger measures as the exchange rate was found to behave in an increasingly unfavorable way. This suggests that words and deeds were only coordinated (i.e. used in a complementary way) in extreme cases. Overall, interventions are found to be moderately successful in correcting unwanted exchange-rate developments, especially volatility.
AB - This paper generalizes the reaction functions of central banks' FX interventions to include oral interventions alongside actual ones. Using Japanese data for the 1991-2004 period, we estimate an ordered-probit model explaining the occurrence of each type of intervention and evaluating the extent to which oral and actual interventions are substitutes or complements. In addition, the effectiveness of interventions is examined using an event-study approach. Our results indicate that the Japanese authorities tended to adopt progressively stronger measures as the exchange rate was found to behave in an increasingly unfavorable way. This suggests that words and deeds were only coordinated (i.e. used in a complementary way) in extreme cases. Overall, interventions are found to be moderately successful in correcting unwanted exchange-rate developments, especially volatility.
KW - Central banks
KW - Communication policy
KW - Foreign exchange market
KW - Interventions
UR - http://www.scopus.com/inward/record.url?scp=70450237133&partnerID=8YFLogxK
U2 - 10.1016/j.jjie.2009.09.001
DO - 10.1016/j.jjie.2009.09.001
M3 - Article
AN - SCOPUS:70450237133
VL - 23
SP - 367
EP - 394
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
SN - 0889-1583
IS - 4
ER -