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The Effectiveness of Foreign Exchange Market Intervention: A Review of Post-2001 Studies on Japan


  • Shinji Takagi

    () (Osaka University, Japan)


Post-2001 studies on Japanese official intervention, though divergent in results, generally support the effectiveness of daily intervention in influencing yen–dollar exchange rate returns. Studies are less conclusive about the impact on volatility. Any impact of intervention appears to be short-lived and a reversal of the initial impact to occur on subsequent days, suggesting market microstructure as the primary channel: intervention acts like any other information and works through order flows. The overriding message of the literature is that the impact of intervention depends on the conditions under which it takes place. Each intervention is thus a unique event. This explains why econometric tests of the average impact of intervention yield mixed results.

Suggested Citation

  • Shinji Takagi, 2014. "The Effectiveness of Foreign Exchange Market Intervention: A Review of Post-2001 Studies on Japan," Journal of Reviews on Global Economics, Lifescience Global, vol. 3, pages 84-100.
  • Handle: RePEc:lif:jrgelg:v:3:y:2014:p:84-100

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    Cited by:

    1. Chen, Yu-Lun & Gau, Yin-Feng, 2015. "Foreign exchange market intervention and price discovery," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 214-227.
    2. Val Lambson & Shinji Takagi & Issei Kozuru, 2014. "Foreign Exchange Intervention and Monetary Policy: A Tale of Two Agencies with Conflicting Objectives," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 976-991, November.

    More about this item


    Foreign exchange market intervention; Japanese foreign exchange rate policy; great intervention; quantitative easing monetary policy;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


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