FX intervention in the Yen-US dollar market: a coordination channel perspective
AbstractThe coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness
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Bibliographic InfoArticle provided by Springer in its journal International Economics and Economic Policy.
Volume (Year): 9 (2012)
Issue (Month): 2 (June)
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Web page: http://www.springerlink.com/link.asp?id=111059
C10; F31; F41; Foreign exchange intervention; Coordination channel; Market microstructure; Nonlinear mean reversion;
Other versions of this item:
- Stefan Reitz , Mark P. Taylor, 2012. "FX Intervention in the Yen-US Dollar Market: A Coordination Channel Perspective," Kiel Working Papers 1765, Kiel Institute for the World Economy.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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