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Implicit bands in the yen/dollar exchange rate

  • Francisco Ledesma-Rodriguez
  • Manuel Navarro-Ibanez
  • Jorge Perez-Rodriguez
  • Simon Sosvilla-Rivero

This article attempts to identify implicit exchange rate regimes for the yen/dollar exchange rate. To that end, we apply a sequential procedure that considers both the dynamics of exchange rates and central bank interventions to data covering the period from 1971 to 2003. Our results suggest that implicit bands existed in two subperiods: April-December 1980 and March-October 1987, the latter coinciding with the Louvre Accord. Furthermore, the study of the credibility of such implicit bands indicates the high degree of confidence attributed by economic agents to the evolution of the yen/dollar exchange rate within the detected implicit band rate, thus lending further support to the relevance of such implicit bands.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 43 (2011)
Issue (Month): 10 ()
Pages: 1241-1255

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Handle: RePEc:taf:applec:v:43:y:2011:i:10:p:1241-1255
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