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On-Going versus Completed Interventions and Yen/Dollar Expectations - Evidence from Disaggregated Survey Data

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  • Yushi Yoshida

    ()
    (Faculty of Economics, Kyushu Sangyo University)

  • Jan C. Rülke

    ()
    (Otto Beisheim School of Management, WHU)

Abstract

This paper analyzes the effectiveness of Bank of Japan (BOJ) interventions between November 1995 and December 2004 on foreign exchange expectations. Unlike previous studies, we focus on exchange rate expectations of individual market participants in the yen/dollar market. To this end, we use disaggregated forecast survey data from Consensus Economics. We find that, in principle, BOJ interventions do not affect exchange rate expectations when we disregard ‘evaluation’ period effect and successful intervention effect. However, applying the methodology proposed by Fatum and Hutchison (2006) to identify successful interventions on current spot market, we provide evidence that only successful interventions affect exchange rate expectations. Compared to the existing literature, which argues that interventions have, if at all, only short-term effects on the exchange rate, we show that successful interventions affect the exchange rate forecasts for up-to three months.

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File URL: http://www.kyusan-u.ac.jp/J/yushi/MyPapers/dp35R.pdf
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Bibliographic Info

Paper provided by Kyushu Sangyo University, Faculty of Economics in its series Discussion Papers with number 35.

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Length: 36 pages
Date of creation: Oct 2009
Date of revision: Dec 2009
Handle: RePEc:kyu:dpaper:35

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Keywords: Bank of Japan; Central bank intervention; Evaluation Period; Forecasts; Exchange rate expectations; Successful intervention;

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  1. Kaminsky, G.L. & Lewis, K.K., 1992. "Does Foreign Exchange Intervention Signal Future Monetary Policy?," Weiss Center Working Papers 93-3, Wharton School - Weiss Center for International Financial Research.
  2. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Working Papers 2005-030, Federal Reserve Bank of St. Louis.
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  4. Frenkel, Michael & Pierdzioch, Christian & Stadtmann, Georg, 2006. "The transparency of the ECB policy: What can we learn from its foreign exchange market interventions?," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 141-156, February.
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