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Why do Central Banks intervene secretly ?preliminary evidence of the BoJ

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  • Michel Beine
  • Oscar Bernal Diaz

Abstract

This paper empirically investigates the main determinants of secret interventions in the foreign exchange (FX) market. Using the recent experience of the Bank of Japan, we estimate a model that explains the share of secret to reported interventions in the FX market. Two sets of determinants are clearly identified: the first is related to the probability of detection of the central bank orders by market participants; the second, to the central bank’s internal decision to opt for secrecy. Our estimations support the arguments of current microstructure theories that rationalize the use of secret interventions.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/10421.

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Date of creation: Jul 2007
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Publication status: Published in: Journal of International Financial Markets, Institutions & Money (2007)
Handle: RePEc:ulb:ulbeco:2013/10421

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  1. Dominguez, Kathryn M.E., 2006. "When do central bank interventions influence intra-daily and longer-term exchange rate movements?," Journal of International Money and Finance, Elsevier, vol. 25(7), pages 1051-1071, November.
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  4. Beine, Michel & Lecourt, Christelle, 2004. "Reported and secret interventions in the foreign exchange markets," Finance Research Letters, Elsevier, vol. 1(4), pages 215-225, December.
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  15. repec:imf:imfpdp:9802 is not listed on IDEAS
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  17. Beine,M. & Palm,F.C. & Laurent,S., 2003. "Central Bank Forex Interventions Assessed Using Realized Moments," Research Memorandum 057, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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  24. Priscilla Chiu, 2003. "Transparency versus constructive ambiguity in foreign exchange intervention," BIS Working Papers 144, Bank for International Settlements.
  25. Frenkel, Michael & Pierdzioch, Christian & Stadtmann, Georg, 2004. "Modeling the intensity of foreign exchange intervention activity," Economics Letters, Elsevier, vol. 85(3), pages 347-351, December.
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