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How successful is the G7 in managing exchange rates?

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  • Fratzscher, Marcel

Abstract

The paper assesses the extent to which the Group of Seven (G7) has been successful in its management of major currencies since the 1970s. Using an event-study approach, the paper finds evidence that the G7 has been overall effective in moving the US dollar, yen and euro in the intended direction at horizons of up to three months after G7 meetings, but not at longer horizons. While the success of the G7 is partly dependent on the market environment, it is also to a significant degree endogenous to the policy process itself. In particular the reputation and credibility of the G7, as well as its ability to communicate a consensus among individual G7 members, are important determinants for the G7's ability to manage major currencies. The paper concludes by analyzing the factors that help the G7 build reputation and consensus, and by discussing the implications for global economic governance.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 79 (2009)
Issue (Month): 1 (September)
Pages: 78-88

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Handle: RePEc:eee:inecon:v:79:y:2009:i:1:p:78-88

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Group of Seven G7 Exchange rate Communication Policy Adjustment Success Event-study methodology US dollar Yen Euro;

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References

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  1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
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  26. Fratzscher, Marcel, 2008. "How successful is the G7 in managing exchange rates?," Working Paper Series 0952, European Central Bank.
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Citations

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Cited by:
  1. Fratzscher, Marcel, 2008. "How successful is the G7 in managing exchange rates?," Working Paper Series 0952, European Central Bank.
  2. Menkhoff, Lukas, 2012. "Foreign Exchange Intervention in Emerging Markets: A Survey of Empirical Studies," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-498, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  3. Dewachter, Hans & Erdemlioglu, Deniz & Gnabo, Jean-Yves & Lecourt, Christelle, 2014. "The intra-day impact of communication on euro-dollar volatility and jumps," Journal of International Money and Finance, Elsevier, vol. 43(C), pages 131-154.
  4. Mehl, Arnaud, 2013. "Large global volatility shocks, equity markets and globalisation: 1885-2011," Working Paper Series 1548, European Central Bank.
  5. Charles Engel, 2013. "Exchange Rates and Interest Parity," NBER Working Papers 19336, National Bureau of Economic Research, Inc.
  6. Benjamin Born & Michael Ehrmann & Marcel Fratzscher, 2011. "Macroprudential policy and central bank communication," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential regulation and policy, volume 60, pages 107-110 Bank for International Settlements.
  7. Fratzscher, Marcel & Mehl, Arnaud, 2008. "Do China and oil exporters influence major currency configurations?," Working Paper Series 0973, European Central Bank.
  8. Fracasso, Andrea & Schiavo, Stefano, 2009. "Global imbalances, exchange rates adjustment and the crisis: Implications from network analysis," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 601-619, September.
  9. Kentaro Iwatsubo & Satoshi Kawanishi, 2011. "The Information Improving Channel of Exchange Rate Intervention: How Do Official Announcements Work?," Discussion Papers 1116, Graduate School of Economics, Kobe University.
  10. Gabriela Contreras M. & Alfredo Pistelli M. & Camila Sáez M., 2013. "Efecto de Intervenciones Cambiarias Recientes en Economías Emergentes," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(1), pages 122-137, April.

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