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An analysis of Japanese foreign exchange interventions, 1991-2002

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  • Alain P. Chaboud
  • Owen F. Humpage

Abstract

The effectiveness of Japanese interventions over the past decade depended in large part on the frequency and size of the transactions. Prior to June 1995, Japanese interventions only had value as a forecast that the previous day's yen appreciation or depreciation would moderate during the current day. After June 1995, Japanese purchases of dollars had value as a forecast that the yen would depreciate. Probit analysis confirms that large, infrequent interventions, which characterized the later period, had a higher likelihood of success than small, frequent interventions.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0309.

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Date of creation: 2003
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Handle: RePEc:fip:fedcwp:0309

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Keywords: Foreign exchange - Japan;

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  1. Dominguez, Kathryn M. E., 2003. "The market microstructure of central bank intervention," Journal of International Economics, Elsevier, vol. 59(1), pages 25-45, January.
  2. Rasmus Fatum & Michael Hutchison, 2003. "Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan," NBER Working Papers 9648, National Bureau of Economic Research, Inc.
  3. Neely, Christopher J. & Weller, Paul A., 2001. "Technical analysis and central bank intervention," Journal of International Money and Finance, Elsevier, vol. 20(7), pages 949-970, December.
  4. Leahy, Michael P, 1995. "The profitability of US intervention in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 823-844, December.
  5. Yin-Wong Cheung & Menzie D. Chinn, 2000. "Currency Traders and Exchange Rate Dynamics: A Survey of the U.S. Market," CESifo Working Paper Series 251, CESifo Group Munich.
  6. Richard K. Lyons, 2006. "The Microstructure Approach to Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262205x.
  7. LeBaron, Blake, 1999. "Technical trading rule profitability and foreign exchange intervention," Journal of International Economics, Elsevier, vol. 49(1), pages 125-143, October.
  8. Humpage, Owen F., 2000. "The United States as an informed foreign-exchange speculator," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 287-302, December.
  9. repec:rus:hseeco:21608 is not listed on IDEAS
  10. Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," The Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July.
  11. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate - Have Interventions Mattered?," IMF Working Papers 00/95, International Monetary Fund.
  12. Carol L. Osler, 2003. "Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis," Journal of Finance, American Finance Association, vol. 58(5), pages 1791-1820, October.
  13. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
  14. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-33, October.
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