Announcements, financial operations or both? Generalizing central banks' FX reaction functions

Résultats de recherche: Contribution à un journal/une revueArticle

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 originaleAnglais
Pages (de - à)367-394
Nombre de pages28
journalJournal of the Japanese and International Economies
Volume23
Numéro de publication4
Les DOIs
étatPublié - 1 déc. 2009

Empreinte digitale

central bank
Reaction function
Central bank
Announcement
event
Exchange rates

Citer ceci

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title = "Announcements, financial operations or both? Generalizing central banks' FX reaction functions",
abstract = "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.",
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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 revueArticle

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