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Japan's Big Bang and the Transformation of Financial Markets

  • Takatoshi Ito
  • Michael Melvin

A first step in the 'big bang' markets was the deregulation of the foreign exchange market on April 1, 1998. This paper examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed with the following results: (1) Holding constant the effects of volume and volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility.

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File URL: http://www.nber.org/papers/w7247.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7247.

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Date of creation: Jul 1999
Date of revision:
Publication status: published as Blomstrom, M., B. Gangnes, S. La Croix (eds.) Japan’s New Economy. Oxford University Press, January 2001.
Handle: RePEc:nbr:nberwo:7247
Note: AP IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
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  1. Hartmann, Philipp, 1998. "Do Reuters spreads reflect currencies' differences in global trading activity?," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 757-784, October.
  2. Takatoshi Ito, 1991. "The Japanese Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262090295, June.
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