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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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Cited by:
  1. Pierre-Guillaume Méon & Ariane Szafarz, 2008. "Labour market discrimination as an agency cost," Working Papers CEB, ULB -- Universite Libre de Bruxelles 08-019.RS, ULB -- Universite Libre de Bruxelles.
  2. Michel Beine & Oscar Bernal Diaz & Jean-Yves Gnabo & Christelle Lecourt, 2007. "Intervention Policy of the BoJ: a Unified Approach," Working Papers CEB, ULB -- Universite Libre de Bruxelles 07-013.RS, ULB -- Universite Libre de Bruxelles.
  3. 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.
  4. Oscar Bernal Diaz & Kim Oosterlinck & Ariane Szafarz, 2008. "Observing bailout expectations during a total eclipse of the sun," Working Papers CEB, ULB -- Universite Libre de Bruxelles 08-015.RS, ULB -- Universite Libre de Bruxelles.
  5. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 09-03.RS, ULB -- Universite Libre de Bruxelles.

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