Size Matters: Central Bank Interventions on the Yen/Dollar Exchange Rate

in Cahiers Economiques de Bruxelles (2007), 49(1), 5-36

This paper explores the effects of the recent interventions of the Bank of Japan on the level and volatility of the yen/dollar exchange rate. A special attention is devoted to the prominent features ... [more ▼]

This paper explores the effects of the recent interventions of the Bank of Japan on the level and volatility of the yen/dollar exchange rate. A special attention is devoted to the prominent features affecting the signal conveyed by these interventions. The results show a clear duality: small unilateral interventions are counterproductive while large and isolated ones influence the FX market in the desired directions. It is also found that the perverse effect is avoided through coordinated operations. [less ▲]