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The Effects of Japanese Interventions on FX-Forecast Heterogeneity

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  • Reitz, Stefan
  • Stadtmann, Georg
  • Taylor, Mark P.

Abstract

This paper investigates the determinants of forecast heterogeneity in the Yen-US dollar market using a panel data set from Consensus Economics. Regardless of the particular model specification and consideration of control variables we find that exchange rate misalignments increase forecast dispersion, while foreign exchange intervention of the Japanese Ministry of Finance dampens expectation heterogeneity.

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File URL: http://mpra.ub.uni-muenchen.de/15603/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15603.

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Date of creation: 05 Jun 2009
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Handle: RePEc:pra:mprapa:15603

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Keywords: Exchange rates; forecast heterogeneity; survey data;

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References

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  1. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2011, Harvard - Institute of Economic Research.
  2. Frenkel, Michael & Pierdzioch, Christian & Stadtmann, Georg, 2005. "The effects of Japanese foreign exchange market interventions on the yen/U.S. dollar exchange rate volatility," International Review of Economics & Finance, Elsevier, Elsevier, vol. 14(1), pages 27-39.
  3. Takatoshi Ito, 1988. "Foreign Exchange Rate Expectations: Micro Survey Data," NBER Working Papers 2679, National Bureau of Economic Research, Inc.
  4. Takatoshi Ito, 2002. "Is Foreign Exchange Intervention Effective?: The Japanese experiences in the 1990s," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a428, Institute of Economic Research, Hitotsubashi University.
  5. Carlos Capistrán & Allan Timmermann, 2009. "Disagreement and Biases in Inflation Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(2-3), pages 365-396, 03.
  6. Ito, Takatoshi & Yabu, Tomoyoshi, 2007. "What prompts Japan to intervene in the Forex market? A new approach to a reaction function," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(2), pages 193-212, March.
  7. Christian Dreger & Georg Stadtmann, 2008. "What drives heterogeneity in foreign exchange rate expectations: insights from a new survey," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(4), pages 360-367.
  8. Elliott, Graham & ITO, TAKATOSHI, 1998. "Heterogeneous Expectations and Tests of Efficiency in the Yen/Dollar Forward Exchange Rate Market," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt5wm0q8mz, Department of Economics, UC San Diego.
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  10. Beine, Michel & Janssen, Gust & Lecourt, Christelle, 2009. "Should central bankers talk to the foreign exchange markets?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(5), pages 776-803, September.
  11. Reitz, Stefan & Slopek, Ulf Dieter, 2008. "Nonlinear oil price dynamics: a tale of heterogeneous speculators?," Discussion Paper Series 1: Economic Studies 2008,10, Deutsche Bundesbank, Research Centre.
  12. Reitz, Stefan & Taylor, Mark P., 2006. "The coordination channel of foreign exchange intervention: a nonlinear microstructural analysis," Discussion Paper Series 1: Economic Studies 2006,08, Deutsche Bundesbank, Research Centre.
  13. Michel Beine & Agnes Bénassy-Quéré & Ronald MacDonald, 2007. "The impact of Central Bank intervention on exchange rate forecasts heterogeneity," ULB Institutional Repository 2013/10423, ULB -- Universite Libre de Bruxelles.
  14. Kathryn Dominguez & Jeffrey A. Frankel, 1990. "Does Foreign Exchange Intervention Work?," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 16, July.
  15. Allen, Helen & Taylor, Mark P, 1990. "Charts, Noise and Fundamentals in the London Foreign Exchange Market," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(400), pages 49-59, Supplemen.
  16. Lukas Menkhoff & Rafael R. Rebitzky & Michael Schröder, 2008. "Heterogeneity in Exchange Rate Expectations: Evidence on the Chartist-Fundamentalist Approach," CESifo Working Paper Series 2502, CESifo Group Munich.
  17. Allan Timmermann & Graham Elliott & Ivana Komunjer, 2004. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Econometric Society 2004 North American Summer Meetings, Econometric Society 601, Econometric Society.
  18. Macdonald, Ronald & Marsh, Ian W., 1996. "Currency forecasters are heterogeneous: confirmation and consequences," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(5), pages 665-685, October.
  19. Frankel, Jeffrey A & Froot, Kenneth A, 1990. "Chartists, Fundamentalists, and Trading in the Foreign Exchange Market," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 181-85, May.
  20. Nikkinen, Jussi & Vähämaa, Sami, 2009. "Central bank interventions and implied exchange rate correlations," Journal of Empirical Finance, Elsevier, Elsevier, vol. 16(5), pages 862-873, December.
  21. Hillebrand, Eric & Schnabl, Gunther & Ulu, Yasemin, 2009. "Japanese foreign exchange intervention and the yen-to-dollar exchange rate: A simultaneous equations approach using realized volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 19(3), pages 490-505, July.
  22. Fratzscher, Marcel, 2004. "Communication and exchange rate policy," Working Paper Series, European Central Bank 0363, European Central Bank.
  23. Benassy-Quere, Agnes & Larribeau, Sophie & MacDonald, Ronald, 2003. "Models of exchange rate expectations: how much heterogeneity?," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 13(2), pages 113-136, April.
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Cited by:
  1. International Monetary Fund, 2011. "Fiscal Expectations Under the Stability and Growth Pact," IMF Working Papers 11/48, International Monetary Fund.
  2. Kentaro Iwatsubo & Satoshi Kawanishi, 2011. "The Information Improving Channel of Exchange Rate Intervention: How Do Official Announcements Work?," Discussion Papers 1116, Graduate School of Economics, Kobe University.

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