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Does transparency in central bank intervention policy bring noise to the FX market?: The case of the Bank of Japan

  • Gnabo, Jean-Yves
  • Laurent, Sébastien
  • Lecourt, Christelle

This paper empirically investigates the induced effect of a more and less transparent central bank intervention (CBI) policy on rumors that can emerge. Using the case of Japan, we estimate a dynamic-probit model that explains the main determinants of false reports (i.e. falsely reported interventions) and anticipative rumors (i.e. rumors about future interventions) with reference to the intervention strategy adopted by the central bank for actual and oral interventions, and the uncertainty climate of the market captured by two volatility measures. Our results suggest that the induced effect of a transparent CBI policy on market rumors critically depends on the type of speeches made by officials.

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Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 19 (2009)
Issue (Month): 1 (February)
Pages: 94-111

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Handle: RePEc:eee:intfin:v:19:y:2009:i:1:p:94-111
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  1. Rasmus Fatum & Michael Hutchison, 2002. "ECB Foreign Exchange Intervention and the EURO: Institutional Framework, News, and Intervention," Open Economies Review, Springer, vol. 13(4), pages 413-425, October.
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  8. Black, Fischer, 1986. " Noise," Journal of Finance, American Finance Association, vol. 41(3), pages 529-43, July.
  9. Jeffrey D. Amado & Stephen Morris & Hyun Song Shin, 2003. "Communication and Monetary Policy," Cowles Foundation Discussion Papers 1405, Cowles Foundation for Research in Economics, Yale University.
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  13. Susana Garcia Cervero & J. Humberto Lopez & Enrique Alberola Ila & Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates: Euro, Dollar, “Ins,†“Outs,†and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 99/175, International Monetary Fund.
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