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Do interactions between political authorities and central banks influence FX interventions? Evidence from Japan

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  • Oscar Bernal Diaz

Abstract

In the United States, Japan and the Euro Zone, FX interventions are institutionally decided by specific political authorities and implemented by central banks on their behalf. Bearing in mind that these specific political authorities and central banks might not necessarily pursue the same exchange rates objectives, the model proposed in this paper takes account explicitly of this institutional organisation to examine its effects on FX intervention activity. The empirical relevance of our theoretical model is assessed by developing a friction model on the Japanese experience between 1991 and 2004 which reveals how the magnitude of that country’s FX interventions is the outcome of the Japanese Ministry of Finance’s trade-off between attaining its own exchange rate target and one of the Bank of Japan’s.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series DULBEA Working Papers with number 06-03.RS.

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Date of creation: Apr 2006
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Publication status: Published by: ULB, DULBEA
Handle: RePEc:dul:wpaper:06-03rs

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Keywords: Central banks; Foreign exchange interventions; Interactions; Friction models.;

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References

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Citations

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Cited by:
  1. Jean-Yves Gnabo & Luiz de Mello & Diego Moccero, 2010. "Interdependencies between Monetary Policy and Foreign Exchange Interventions under Inflation Targeting: The Case of Brazil and the Czech Republic," International Finance, Wiley Blackwell, vol. 13(2), pages 195-221, 08.
  2. Michel Beine & Oscar Bernal & Jean-Yves Gnabo & Christelle Lecourt, 2007. "Intervention Policy of the BoJ: A Unified Approach," CESifo Working Paper Series 1894, CESifo Group Munich.
  3. Bernal, Oscar & Oosterlinck, Kim & Szafarz, Ariane, 2010. "Observing bailout expectations during a total eclipse of the sun," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1193-1205, November.
  4. Pierre-Guillaume Méon & Ariane Szafarz, 2008. "Labor market discrimination as an agency cost," DULBEA Working Papers 08-19.RS, ULB -- Universite Libre de Bruxelles.
  5. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers 09-03.RS, ULB -- Universite Libre de Bruxelles.

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